Hope Isn't an Insurance Policy, My Friend!

One customer injury can cost more than your entire first shipment of inventory. Are you protected?

Let me ask you something.

You spend weeks finding a product. You negotiate with a supplier, order your first batch, build a killer Amazon listing, and finally start making sales.

Life is good. 🎉

Then one day, you get a message.

A customer says your product caused an injury. They want compensation. They may even hire a lawyer.

Suddenly, those five-star reviews don't look so exciting.

Here's the truth: Making sales is great. Protecting the business behind those sales is even better.

And that's where product liability insurance comes in.

Let's break it down without making your head spin.

1. What Is Product Liability Insurance?

Product liability insurance helps protect your business if someone claims your product caused bodily injury or property damage.

Think of it as a financial safety net.

For example, imagine you sell:

• Kitchen gadgets that cause burns.

• Phone chargers that overheat.

• Children's toys with small parts that create choking risks.

• Fitness equipment that breaks during use.

• Beauty products that cause an allergic reaction.

Even if you didn't manufacture the product, you could still face a claim.

Why?

Because you're selling it under your business.

And customers don't always care whether the mistake happened at the factory, during shipping, or somewhere in between.

They want someone to take responsibility.

Product liability insurance can help cover eligible legal defense costs, settlements, and judgments, subject to your policy terms, limits, and exclusions.

Without it, those costs may come straight out of your business bank account.

Ouch.

2. A Real-Life Wake-Up Call: The Amazon Battery Case

Let's look at a real case that every Amazon seller should know about.

In 2020, a California appeals court decided a case called Bolger v. Amazon.com, Inc.

Here's what happened.

A customer bought a replacement laptop battery through Amazon from a third-party seller.

The battery exploded and caused serious injuries.

The customer sued, including Amazon.

Amazon argued that it was just the online marketplace connecting buyers and sellers.

But the California Court of Appeal found Amazon could be held strictly liable under California product liability law in the circumstances of that case.

Now, here's the important lesson.

You don't have to build a product in your garage to face product liability risks.

Selling products comes with responsibilities.

And while this case was about Amazon's potential liability, it highlights why third-party sellers should take product safety and insurance seriously.

The lesson? Don't wait for a customer complaint to start thinking about protection.

3. Does Amazon Require Product Liability Insurance?

Yes, Amazon has insurance requirements for sellers who meet certain sales thresholds.

Under Amazon's seller insurance requirements, sellers generally must obtain commercial general liability insurance within 30 days after exceeding $10,000 in gross monthly sales on Amazon, or when Amazon requests it.

Amazon's stated minimum coverage is generally $1 million per occurrence and $1 million aggregate.

But don't stop reading here.

Requirements can change, and Amazon may have additional conditions depending on your marketplace, business, and products.

Check your Seller Central account and the current Business Solutions Agreement for the latest rules.

Also, remember this:

Amazon's requirement isn't the same as saying you don't need insurance before reaching $10,000.

A claim can happen on your first sale.

Your risk doesn't wait for your revenue to grow.

4. What Should Your Product Liability Policy Cover?

Not all insurance policies are created equal.

You don't want to buy the cheapest policy, only to discover it doesn't cover the product you're selling.

Here are five things I recommend checking before signing anything.

1. Bodily injury coverage

Does the policy cover claims involving injuries caused by your product?

This is one of the big ones.

2. Property damage coverage

What if your product damages someone's home, computer, or other belongings?

Make sure your policy addresses this risk.

3. Legal defense costs

Even if a customer makes a claim that has no merit, defending yourself can get expensive.

Ask whether legal defense costs are covered and whether they reduce your policy limits.

4. Product and completed operations coverage

This is important.

You want coverage for claims involving products you've sold, even after the customer has received and started using them.

5. Worldwide coverage

If you're selling across borders, check where your policy applies.

A policy that covers you in the United States may not automatically cover every international claim.

Don't assume. Ask.

5. How Much Does Product Liability Insurance Cost?

Here's the good news.

You don't necessarily need to spend thousands of dollars to protect a small Amazon business.

Many small businesses can find basic commercial general liability coverage for a few hundred dollars per year.

However, your actual price depends on several things:

• The type of product you sell.

• Your annual sales.

• Your product's risk level.

• Your sales territories.

• Your coverage limits.

• Your claims history.

Selling silicone kitchen spatulas isn't the same risk as selling electric heaters or children's car seats.

Insurance companies know that.

My advice?

Get quotes from at least three insurance providers.

Compare the coverage, not just the price.

A cheap policy with a big exclusion can be like buying a parachute with a hole in it.

Technically, you bought one. 😅

6. How to Get Product Liability Insurance for Your Amazon Business

You don't need an insurance degree to get started.

Here's the process I'd follow.

Step 1: Make a list of your products

Write down every product you sell.

Include materials, intended uses, and any special features.

Step 2: Gather your business details

Most insurance providers will ask for:

• Your legal business name.

• Your business address.

• Estimated annual revenue.

• Product categories.

• Countries where you sell.

• Your manufacturing or sourcing details.

Step 3: Contact insurance providers

Look for providers or brokers who understand e-commerce and Amazon sellers.

Tell them exactly what you sell.

Don't hide product details to get a lower quote.

That can come back to bite you when you need to make a claim.

Step 4: Compare policies

Look closely at exclusions, deductibles, coverage limits, and legal defense provisions.

Ask whether your specific products are covered.

Step 5: Submit your insurance information to Amazon

Once you have a policy, follow Amazon's current instructions for submitting your certificate of insurance.

Keep your policy active and update your documents when needed.

Simple process. Big peace of mind.

7. Five Mistakes Beginners Should Avoid

I've seen sellers get so focused on sales that they forget about protecting the business.

Don't make these mistakes:

• Waiting until Amazon asks: You may be exposed before you reach its insurance threshold.

• Buying the cheapest policy: Low premiums don't always mean good protection.

• Assuming your supplier is responsible: Your supplier's insurance may not protect your business.

• Ignoring product exclusions: Some categories carry special restrictions.

• Forgetting to renew: A lapsed policy can leave you exposed and put your Amazon account at risk.

Remember, insurance isn't just another business expense.

It's part of running a real business.

🎯 The Big Takeaway

I know what you're thinking.

You're already paying for inventory, shipping, Amazon fees, software, and advertising.

Now another expense?

I get it.

But here's how I look at it.

You wouldn't spend thousands of dollars buying inventory and then leave it sitting outside in the rain.

So why build an Amazon business without protecting it from a potential lawsuit?

You don't need to overcomplicate things.

Start by understanding your risks, getting a few quotes, and finding coverage that fits your products and budget.

Build your business to make money. Protect it so you can keep making money.

And remember my favorite rule:

💬 It's better to have insurance and never need it than to need insurance and not have it.

✍️ Signing Off

Sell smart. Protect your profits. Sleep better.

Until next time, keep building!

Andy Splichal
Founder & Managing Partner of True Online Presence & Author of the Make Each Click Count Book Series

P.S. You’ve got products to sell and a business to scale. If PPC feels like a second job (or a black hole for your budget), let me handle it. I’ve scaled dozens of FBA brands profitably.
💬 Book a quick discovery call — I’ll show you what’s possible.

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