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Amazon Seller Insurance Requirements for Non-Resident Sellers

Amazon is now enforcing insurance requirements to sell on their marketplace. Per Amazon’s terms of service, business liability insurance protection is required for all sellers. Do you carry business liability insurance? If not, your assets are not protected, even if you operate through a separate legal entity.

Update: Amazon has made an important update to terms of service (TOS) insurance requirements. As of August 10th, 2021, sellers received an e-mail from Amazon announcing a revision of Amazon’s A to Z Guarantee program. In that announcement, Amazon announced that on September 1st, it is changing when a seller needs to obtain liability insurance. The seller will need liability insurance when they have reached $10,000 in sales for three consecutive months or once they obtain $10,000 in sales in any month.  Amazon sellers are on the hook for claims above $1,000. That means you have a lot of exposure, especially if you are hit with a lawsuit. $1 million is coverage is required, but that may not be enough to protect you. See Amazon’s Notices to Seller’s Requiring Proof of Insurance.  Foreign sellers must purchase in their local country and have a global protection policy (if you can even find anyone to insure you), if not, your best option is outlined below with the formation of a U.S. company.

What is required for Non-Resident Amazon Sellers to Obtain a Certificate of Insurance from a U.S. insurance company and keep their account active?

Here is your checklist to obtain a Certificate of Insurance from a U.S. insurance provider (our recommendation is Well-Insurance.com).

  • A U.S entity
  • A U.S. address (not a PO Box)
  • An EIN from the IRS
  • Obtain the COI (a quote will be provided after your U.S. company is in place)
  • Update your Amazon Seller Account properly and receive address verification (NCP provides all these steps)
  • Upload your certificate of insurance

Other key support areas: 

  • Which U.S. entity is based is best upon your level of U.S. involvement and tax treaty with your country?
  • Which U.S. state is best to lower your insurance costs, and give you the best option for compliance, if a utility bill is required?
  • What U.S. tax returns are required and the fees involved based upon your situation?
  • What annual requirements are triggered with my U.S. entity formation?
  • Complete support between your U.S. entity formation, your certificate of insurance, and updating Amazon correctly to keep your account active.

Go here to schedule a diagnostic call with our team and we will share our best options to help you solve your certificate of insurance requirements to keep your Amazon account active.

Amazon’s 30-Day Notification and Insurance Requirements

AmazonInsuranceLiability30-dayNoticeSellers with professional selling plans on Amazon.com must provide proof of Commercial General Liability insurance or Certificate of Insurance (COI). This insurance, obtained at the seller’s expense, shall cover up to $1,000,000 per occurrence and in the aggregate and must include product liability, bodily injury, or personal injury, property damage, and other requirements as stated in the Participation Agreement. The insurance must indicate that “Amazon.com, Inc., and its affiliates and assignees” are added as additional insureds.”

This was amended, as we mentioned earlier. A seller needs to obtain liability insurance from once the seller has reached $10,000 in sales for three consecutive months to once they obtain $10,000 in sales in any month.

Amazon said it will pay for A to Z guarantee claims seeking compensation for personal injury and/or product damage under $1,000 and will not seek compensation from sellers who hold valid insurance.

With these new changes, you may receive a notice where you have 30-days to provide proof of insurance before your account is potentially suspended.

The challenge is as a non-resident, your insurance rates may be much higher or not even possible to obtain. For example, most foreign insurance companies don’t want to insure supplements due to the risk. Those companies are partnered with American insurance companies.

U.S. Company Formation Strategy

For the American insurance company to underwrite your policy, you must be operating through a U.S. entity. A U.S. LLC is most common. The key is to make sure your U.S. LLC is established properly, especially with the IRS, so you avoid any necessary audits.  Go here to learn more about U.S. taxation requirements for non-residents and the components of a complete U.S. LLC formation.

Once you have the U.S. LLC., the insurance provider can provide you a quote. Yes, an EIN. is required, but it will need to be attached to the file. But typically, you can receive a quote before having your EIN in place.

We realize it would be great to receive a quote BEFORE you form a U.S. company, but that is not the way it works. Of course, you will want to know the benefits of forming a U.S. company and the process to move from selling on a foreign entity on Amazon to a U.S. company.  Here is our report that gives an overview of the process.

How to Classify Your Insurance Correctly for Proper Coverage when You Import Your Product from China


Amazon wants you to provide them a certificate of insurance (COI). Amazon does not know the difference between a basic policy that is classified and rated for an “online retailer or e-commerce retailer” vs. a policy that has been rated as an “importer” or “manufacturer” of some type.  But this should be a big difference when it comes to protecting your brand and business.  Also, Amazon must be added as an additional insured and notified if the policy is canceled or expires. 

If you are dropshipping someone else’s brand, a basic insurance policy such as an “online retailer or e-commerce retailer” will be sufficient. These are less money also. This is sufficient because if there is a lawsuit, it will be pointed to the brand you are dropshipping, not necessarily you as the seller. That does not mean you can’t be sued, but lawsuits are about going after deep pockets at the end of the day.

If you sell private label products, you do NOT want to be classified and rated as an “Online Retailer” or “eCommerce Retailer.”  If you want real coverage for your brand, not only to appease Amazon’s certificate of insurance requirement. This will not be sufficient coverage in the event of a real lawsuit. Why? You, the seller, assume all the liability exposure, even though your products were manufactured in China because you can NOT subrogate back against a Chinese manufacturing facility.  What does subrogate mean? Subrogation describes a legal right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured.

If you are a private label seller, you wanted to be correctly rated and classified as an importer or manufacturer of some type, which will come with a higher insurance premium.

Now you will have the proper coverage in the event your company is sued. If your products are manufactured in the U.S., you expect your premium to be slightly lower (all other factors). Of course, if you are selling products subject to more liability, that will impact your premiums also.

Your insured name must match the “legal entity” name you provided to Amazon for your certificate of insurance (COI) to be accepted.

In the end, you want to work with an insurance provider that will give you the proper coverage for your business and family to protect your brand, not only to provide Amazon or other marketplaces with a certificate of insurance.

What is the Time Frame to Obtain Liability Insurance?

A quote can happen within a day or two if straightforward but may take a few more days if more complex. The key is someone filling out the application correctly.  The certificate of insurance (COI) will come in about 2-3 days after the application is submitted and the first payment to the insurance provider, monthly, quarterly, or annual.  This is important because Amazon is giving out 30-day notices to update your account to avoid a suspension.

You may also ask for worldwide coverage, which is only another $200 + or so in many cases.

Estimated Insurance Costs?

You will want to know the estimated cost of liability insurance for your Amazon business. The best way is to obtain an estimate when your U.S. LLC has been formed. See our U.S. Entity formations page for U.S. LLC costs. Our most common package for Amazon FBA sellers is our Essential Package.

Here is an overview of potentially what liability insurance may range for a year.

• Basic household items are a range from $400 – $600 ballpark.
• Higher-risk products such as supplements, children’s items, exercise/sporting goods, cosmetics, nutritional products may range from $1,000 to $10,000. The average in these categories is around $3,500.

To receive an accurate price quote for the proper coverage, whether you are dropshipping or private label seller, reach out to Well Insurance.

Liability Insurance

Amazon is not the only marketplace that requires liability insurance. Here are a few of the major ones that will also want to see your certificate of insurance.

• Target
• Walmart
• Wayfair

What Will Happen if Amazon Sellers Don’t Have Insurance by September 1st, 2021?

Update August 31st, 2021: After speaking with one of the Amazon insurance providers, they have revealed that Amazon is planning to send out an email a week or two after September 1st for all those who did not comply, giving a 30-day final notice for compliance. This is much more serious. Will they suspend your account after that 30-day notice? That is not clear. Will foreign sellers in some countries be given more time because it is harder to obtain insurance? That is possible. Could the 30-day notice change to a 60-day notice? That is possible but don’t count on it.

Timing is Key 

Once you hit the $10K sales thresholds in a month, you must provide insurance to Amazon.

Don’t wait until the last minute to obtain liability insurance. Even though it can happen quickly, you will want to make sure you have your U.S. entity formed properly not only with the state (the easy part) but with the IRS. That internal documents are drafted correctly to make sure your Amazon.com business is protected.

Since our team has worked with the Amazon team closely in the past, we have the correct steps to help you also update your Amazon seller account after formation to ensure your account is not suspended. Yes, we even can provide the “dreaded” utility bill (only on companies we form) if required.

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