Amazon’s Prime Day is upon us – July 11th and 12th to be exact – and while this event is highly anticipated among eager consumers, sellers are just as enthused about it. 

As the digital landscape continues to evolve, few online events hold the same level of significance for online entrepreneurs as Amazon Prime Day. This annual shopping extravaganza has become a commercial phenomenon, offering unparalleled opportunities for business owners to boost their sales, increase brand visibility, and elevate their businesses to new heights.

Last year, Amazon hosted its most successful Prime Day to date, with over 300 million units sold and accumulating over $12 million in revenue. Amazon stands firm in its belief that this year’s Prime Day will break yet another record in sales.  

So, why is Prime Day such a pivotal event? First introduced in 2015 to celebrate Amazon’s 20th anniversary, Prime Day has quickly evolved into a globally anticipated shopping event – celebrated across 19 countries and attracting millions of eager shoppers.  

Prime Day is not just for shoppers. It serves as a catalyst to catapult many businesses higher up Amazon’s SERPS and (hopefully) achieve more visibility and brand recognition. Prime Day also enables businesses to leverage Amazon’s marketing tools and promotional opportunities to expand their reach, connect with new customers, and build long-term relationships. 

However, if one’s online store isn’t properly protected, Prime Day can become a nightmare for business owners. In this blog, we will uncover why third-party Amazon sellers are more vulnerable to financial calamities than brick-and-mortar stores, and why safeguarding one’s business is especially important on big days like Prime Day.  

How Did Prime Day Come to Be? 

Prime Day came to fruition on July 15, 2015, which was Amazon’s 20th anniversary. Its primary purpose was to celebrate loyal Prime members. According to the giant retailer, “Our only goal [was to] offer a volume of deals greater than Black Friday, exclusively for Prime members.”

The first Prime Day lasted 24 hours, and Prime members bought more items than they had on Black Friday of the previous year. Perhaps more excitingly, FBA sellers enjoyed the biggest day ever with record-breaking sales (300%) worldwide. 

But those numbers are peanuts compared to the projected sales of Prime Day 2023, which are forecasted to surpass $8 billion in US eCommerce sales over the upcoming two-day period. And while these numbers are sure to give any Amazon seller a reason to celebrate, they are also a reason to give a seller pause if they are not properly protected. 

We don’t mean John-Cena-on-steroids-wielding-a-knife protected.  

We mean protected with high-quality insurance.  

Amazon’s Insurance Requirements for Sellers 

If you are an Amazon seller, you are likely very aware of Amazon’s insurance requirements. But if you are not, here are the Cliffs Notes: 

  • If your online store has exceeded $10,000 in gross sales in one month, even if not consecutively, you are required to obtain general liability and product liability insurance within 30 days. You may purchase either commercial general, excess, or umbrella liability insurance – depending on what you sell and what your business needs are.  
  • Policy limits must be at least $1 million per occurrence and in aggregate, covering all liabilities that may result or occur in conjunction with your business’ operations or products. 

As insurance agents, we often hear: “I haven’t hit the $10,000 a month cap, so I don’t need insurance” or “I already have general and product liability coverage, so I’m good.” Both these mindsets are flawed, and here is why… 

Ecommerce Stores Need Liability Insurance More Than Brick-and-Mortar Stores 

To be fair, brick-and-mortar businesses should also carry insurance. However, their exposure to operational, customer, and product calamities are generally much less when compared to their online counterparts.  

While selling online brings immense opportunities for Amazon sellers, it also presents distinct challenges compared to physical stores. This is particularly true during big online events like Prime Day or Black Friday. But why? 

Online Stores Have More of a Reach  

If you have a physical store, your target audience is significantly more localized than if you have an online store.

One of the massive benefits of selling on Amazon is that your audience is global. In a single day, you can sell products to customers in any state and in (almost) any country. And because of this reach, you are likely pushing significantly more products than a mom-and-pop shop in rural area.  

While this is a huge advantage, it also means it’s a huge liability. According to SellerApp: “In 2021, Amazon shipped over 5 billion items to customers around the world, with an average Order Defect Rate (ODR) of 0.30%. That means out of every 1000 orders, three were returned due to defects.” 

And while that number may not seem like a lot, remember it only takes 1 defective product to result in a lawsuit as a result of bodily injury, property damage, or emotional distress.  

This is why insurance is particularly important for Amazon sellers to have, especially during a huge event like Prime Day where the sheer velocity of products being sold puts you at a greater risk of having dissatisfied customers.  

Online Businesses Lack Face-to-Face Customer Interactions 

One of the most prominent differences between physical and online merchants is the absence of face-to-face engagement with customers. This distinct difference brings forth a greater need for Amazon sellers to prioritize liability insurance. 

The lack of direct communication between Amazon sellers and their customers creates a unique hurdle in terms of customer satisfaction and issue resolution. In a traditional store, sellers can engage in real-time conversations, address concerns, and provide immediate assistance. This face-to-face interaction enables business owners to build trust with their customers, diffuse potential conflicts, and ensure a positive customer experience. 

In contrast, eCommerce platforms like Amazon rely heavily on digital interfaces, leaving sellers with limited opportunities for direct customer engagement. This communication gap amplifies the risk of miscommunication, misunderstandings, and unresolved disputes. 

Liability insurance becomes a crucial safeguard for Amazon sellers precisely because it compensates for the absence of face-to-face interaction. It provides a layer of protection against the potential liabilities arising from online transactions. Without the ability to assess customers’ needs and preferences in person, sellers may inadvertently encounter issues related to product quality, shipping delays, or misrepresentations. These disputes can quickly escalate, leading to negative reviews, damaged reputations, and financial losses. Liability insurance acts as a safety net, covering legal costs, settlement expenses, or potential damages resulting from such incidents. 

Amazon Sellers Are More Reliant on Third-Party Operations 

If you are a PL seller, then you are fully aware how much involvement is required from other services to get your products into the hands of customers. Third-party sellers rely on suppliers and manufacturers to fulfill customer orders. They rely on inspection teams to catch defects in any of their products. After that, sellers rely on cargo shipping companies and delivery trucks to get their products across seas and into Amazon warehouses without any issues. Do you see where we are going with this? 

No matter how tight your supply-chain operations are, unforeseen defects or errors can occur during manufacturing and shipping. These can lead to faulty products reaching consumers.  

Due to the nature of eCommerce, Amazon sellers never even SEE the majority of products they sell, while brick-and-mortar business owners do. This distinction makes liability insurance particularly important for online business owners, as it shoulders the financial burdens that may arise from product claims – including legal fees, settlements, or judgments. 

During big events like Prime Day, Black Friday, and Christmas, companies in the supply chain sector are stretched to the max, with mounting pressure to turn over products at greater speeds than any other time of the year. This can lead to small mistakes with huge consequences – for the seller.   

General and Product Liability Insurance is Often Not Enough for Amazon Sellers  

There is a reason Amazon only requires its sellers to obtain liability insurance – it’s to protect them, not you. So, while liability insurance is a must for ANY seller on ANY platform DESPITE their gross monthly sales, it’s important to understand Amazon’s policy regarding insurance is to keep them out of hot water.  

In addition to general and product liability insurance, there are several other insurance types that play an important role in mitigating the unique risks Amazon sellers face – risks that physical stores don’t have to address nearly as often.  

(For a more in-depth look at the different kinds of insurance available to you, check out our blog on differentiating all the types of eCommerce insurance policies.) 

Cyber Liability Insurance 

In today’s interconnected world, cyber threats pose a significant concern for online businesses. Unlike brick-and-mortar stores, Amazon sellers heavily rely on digital platforms, customer databases, and online transactions to operate their businesses. This reliance makes them vulnerable to cyber attacks, data breaches, and other online security breaches.  

Cyber liability insurance provides coverage for financial losses, legal expenses, and reputation damage resulting from such incidents. It helps with expenses related to data recovery, legal notifications, public relations, and regulatory compliance. Perhaps most importantly, cyber insurance helps cover the costs of notifying customers of the breach and even offering credit protection. In turn, this can help negate the potential flood of bad reviews and preserve your brand’s reputation.  

In fact, cyber attacks are more likely to happen during big consumer events like Prime Day and Cyber Monday than any other time of the year. 

Cargo and Transit Insurance 

Since brick-and mortar businesses usually have to ship their products in from another location, business owners have the luxury of being able to check products for damage. Amazon sellers (particularly those going through FBA) don’t have that advantage.  

Damaged or lost shipments during transportation can lead to customer dissatisfaction, financial losses, and potential liability claims. Cargo insurance will pay for the value of any products that are damaged, stolen, or lost while in transit.  

As mentioned previously, during high-traffic consumer holidays, the stress that is put on supply chain operations can often lead to lost or damaged inventory.  

Product Recall Insurance 

While both brick-and-mortar stores and online businesses are equally prone to product recalls, the aftermath of a product recall for online sellers can be significantly more challenging and costly to bounce back from.  

With complex global supply chains and a diverse range of products, the risks of product defects, contamination, or safety concerns are heightened for eCommerce sellers. Moreover, the digital nature of their operations and limited face-to-face interactions requires a swift and efficient response when their product (or even just a part of their product) is withdrawn from consumer availability. 

Firstly, Amazon sellers have the unique hurdle of navigating various jurisdictions and regulations based on the state or country they sell to.  

Secondly, because of their reach, sellers are stuck with the challenge of notifying their customers of the recall, refunding them, and recovering all the products they’ve either sold, have sitting in warehouses, or are en-route. As you can imagine, this is a time-consuming and costly feat.  

Product recall insurance not only helps with the financial burden of a recall, but also helps alleviate reputational damage. It enables sellers to promptly address recalls, communicate effectively, and provide solutions to customer concerns. 

And because of the sheer mass of sales Amazon sellers potentially face on Prime Day, if one of the products being sold during this timeframe ends up being recalled, product recall insurance can shoulder much of the responsibility associated with the aftermath.  

Prime Your Online Business Day 

We at Ashlin Hadden Insurance have specialized in protecting Amazon and eCommerce businesses for over six years now. We are your biggest cheerleaders and advocates. 

And because we are so passionate about your success, we encourage you to do everything you can to safeguard that success. That’s why we work so hard to get you the RIGHT insurance at the RIGHT price. Nobody deserves to lose their money and assets because of everyday risks that are out of your control. With proper insurance, you can be in control of your finances and assets.  

We wanted to get in on the action of this year’s Prime Day extravaganza. But instead of helping out consumers, we wanted to help YOU – the sellers. From July 11 – July 12, 2023, Ashlin Hadden Insurance is offering 50% off our agency fee when you purchase an insurance policy through us.  

To get started, fill out our 10-minute application to get a FREE quote! Don’t forget to add the promo code PRIME23 to claim 50% off your agency fee!  

Best wishes to every seller on Prime Day! 


  • McClain Warren

    McClain comes to the agency with years of knowledge and experience in the marketing and eCommerce world. She loves people (except Bob), networking, and creating eye-catching and intriguing content. She also loves pineapple on her pizza and will fight you if you say it's awful.

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