Is Amazon Suspension Insurance Worth the Cost?

Amazon sellers face a high likelihood of account suspension and blocked product listings.  In fact, of the 2.5 million third party sellers on Amazon in 2019, an estimated 20% have received some form of suspension or account deactivation.  Particularly in light of the COVID-19 crisis, and amidst Amazon’s heightened efforts to protect its customers from tainted or dangerous products, Amazon sellers now more than ever before are confronted with an ever-changing landscape of seller rules and policies.  Account suspension insurance is one way for Amazon sellers to protect against a worst-case scenario of suspension by ensuring they will be able to collect funds and continue operations if their selling channel and/or distributions are halted.   While Amazon requires sellers with annual sales of over $10,000 to carry at least $1 million of general liability insurance coverage, this general liability coverage does not cover sellers in the event of a suspended account or blocked ASINs.  To that end, this post examines some of the considerations that go into purchasing Amazon seller suspension insurance, including timing issues, cost, and reliability of providers. 

Timing

If your Amazon seller account is suspended, you traditionally have 17 days to submit an appeal for reinstatement to the Amazon seller team.  While this timeline has been extended amid the COVID-19 crisis, it remains to be seen whether this is a temporary measure by Amazon or will be the new normal once the world stabilizes from the devastating pandemic.  Regardless of its duration, while the best practice remains to submit your initial appeal within two weeks of receiving a suspension, it can take days, weeks or sometimes even months to get your account fully reinstated or blocked product listings re-posted.  While the speed of reinstatement depends both on the strength of your appeal letter and Amazon’s processing time (e.g., they tend to move more slowly near the end of the year), the fact remains that the account reinstatement process can be slow-moving and frustrating  Even after you submit your appeal, Amazon often comes back requesting additional information.  As a result, even suspended sellers with strong cases for reinstatement may need suspension insurance.  As days turn into weeks and weeks into months, sellers must contend with how they will adjust for lack of income and suspended business channels.  Depending on the extent of your Amazon account suspension and its impact on your overall operations, some sellers may even have to let staff go or halt product orders from suppliers or eventors, and your business may start to suffer long-term implications. Simply put, insurance allows for additional time to get your affairs in order and proceed in an efficient way that will preserve your business.  Successful appeals require time, thought, execution and, in most cases, money, and insurance may provide a stopgap solution for sellers facing financial strain from suspended operations. 

Should I Buy Amazon Suspension Insurance to Protect Against Amazon Account Suspension?

The decision whether to purchase Amazon seller suspension insurance is a personal one, and typically hinges on two key considerations:  risk of suspension and overall financial strength.  First, ask yourself if you are at high risk for suspension.  If you have previously had your Amazon account suspended or are currently at high risk (whether due to warnings from Amazon or red flags identified by Appeal Wizards, you may be a strong candidate for Amazon seller suspension insurance.  Our research indicates that sellers who have previously been suspended are more than five times as likely to be suspended again compared to sellers who have never been suspended.  While much of this has to do with Amazon’s internal monitoring procedures (whereby they tend to revisit and re-examine prior “violators” more frequently than non-offending sellers), repeat suspenders usually also take longer to reinstate than first-time offenders.  This slippery slope means that if you have previously had your account suspended or product listings blocked, not only are you more likely to be suspended again but also your path to reinstatement will be a more difficult one.  Second, ask yourself if you are prepared for a suspension, both financially and operationally.  Sellers with more reserve cash on hand are obviously better able to weather the storm of suspension until their operations are reinstated.  As a related point, sellers should engage in honest self-assessment as to whether they are able to handle the potential reinstatement process quickly and efficiently.  In other words, sellers should ask themselves whether they have a good grasp of Amazon’s policies and procedures, whether they have the knowledge and infrastructure to quickly draft a successful appeal package (or hire an appeal service like Appeal Wizards to handle their appeal, and how long they are financially equipped to go without new money coming in the door.  While most established Amazon sellers will have financial projections to assist with this forecasting, we recommend mapping out two-week, one-month and three-month scenarios.  If you lack the time or resources to devote to learning about these subjects, then it is often a good idea to have insurance as a back-up plan and/or talk to a consultant about planning and preparation. In short, the less cash you have on hand, the higher the percentage of your overall income that comes through Amazon, and less prepared you are operationally to handle a suspension, the more likely you are to need insurance.  

How Do You Purchase Amazon Suspension Insurance to Protect Against Amazon Account Suspension?

There are many scam providers of Amazon seller suspension insurance so it is important to choose your provider only after adequate research and diligence.  Stick with trusted providers of Amazon suspension insurance such as Lloyds of London and Well Insurance, or others that come highly recommended by reliable sources like Bloomberg and Consumerist.  Shop around for quotes from multiple companies – a quote from a reputable provider is usually quick and easy to get,  and providers should also provide you with additional information about their company and coverage along with the quote.  As a rough benchmark, Well Insurance provides a standard Amazon seller suspension policy with a one-year term that covers up to $1 million for 90 days of suspension, paid on a per day basis.  This means that, depending on level of coverage, Amazon sellers can receive a per day coverage for actual losses incurred up to approximately $11,000.  While sellers may qualify for this Well Insurance policy even if they have previously been suspended, the policy is only available to Amazon sellers based in, and selling to customers in, the United States. Finally, do not be afraid to use quotes received from one company as leverage against another — playing insurance companies off against each other is a great way to drive down rates and obtain the best policy possible. 

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