When you use your upgrade through Amazon, you are signing a new 2 year contract with Verizon. You may also be signing a contract with Amazon to maintain your service at a certain level (so no plan or phone changes) for 6 months, so you may want to read that carefully before you go through them rather than Verizon's website or a Verizon store.
I've never heard of a security deposit being charged on an existing line, even when moving to a smartphone. Are you sure it is upgrading your current line and not adding a line to your plan?
I too am looking to upgrade to a smartphone from a ancient flip phone from 2006. I want to get the Droid x2 before the changes to plans go live on 7th. I have a few concerns about this. First I am on a family plan, when I enter the account information and my line number it says I have an upgrade. When I go through checkout it tells me I have to agree to some fees, namely the security deposit and the activation cost. Now when I get to the final checkout I have the cost of the phone from Amazon then in a separate box it says billed by Verizon: Plan change: No price change, Line Change: 29.00$ month unlimited plan. It also has a separate box for activation fees that also says zero. My main question is I pay the phone price to Amazon and the 29.00$ month to Verizon for my new data plan but otherwise it should not bill be for a new 2 year contract or for another security deposit. The checkout page implies this but I don't like signing away without understanding. Thanks for the help.
As the other poster said, this sounds like you are trying to add a line instead of upgrading... Make sure you double check that.
You'll have to sign a new 2 year contract when using your upgrade, otherwise you'd have to pay the full retail price of the phone. That's the whole point of upgrading. You'll be paying an additional $29.99/month for unlimited data as well.
Read Amazon's contracts VERY carefully. They are different than Verizon's.