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Shipping Insurance: Here’s Why You Should Insure Your Packages

Published in All Resources

Shipping insurance is a little thing that can end up making a big difference. Imagine using resources to attract and acquire a new customer, only to have their very first order lost or damaged. Insured package delivery protects your packages against loss or damage, which can be truly valuable when dealing with numerous or important packages. Keep reading to learn everything you need to know about shipping insurance – and why smart businesses use it. 

What Is Shipping Insurance?

Insured package delivery is becoming increasingly important to the business world.

One survey shows that when eCommerce packages arrive damaged or arrive late, buyers tend to expect refunds or discounts. They also expect expedited shipping on any replacement products! Though shipping challenges are rare, they do happen. If they happen enough, the costs of placating unhappy customers will really add up. Most online retailers simply can’t afford to take on the costs of those shipping issues. That’s where shipping insurance comes in.

Simply put, shipping insurance is a service that protects businesses during transit against damaged, lost, or stolen packages. In those instances, shipping insurance will reimburse the shipper the declared value of the items in the package. This is especially great coverage if you do have to offer a refund to customers; you’ll receive a refund and won’t take such a hit to your profit on the sale. 

What Does Shipping Insurance Cover?

Situations covered by shipping insurance will vary based on factors like the shipping insurance policy chosen and the shipping company that is providing the services. Typically the shipper can expect coverage of events over which the shipper had no control. That means things like delivery delays, damage to goods, or package theft that takes place prior to the delivery.

Every provider will have their own terms, which you should review and consider. Depending on your shipping provider, they will have specific levels of insurance that are based on the package value. The shipper must declare the value of the package at the time of shipping. Shippers should expect to get reimbursement based on those declared values.

That being said, items can also be of “amazing” or “hard to determine” value. Things like artwork, antiques or collectibles, jewelry, or other custom items risk having the full value of the item lost if there is a problem. Another caution to be mindful of is that if an item arrives with damages but cannot be fixed; in this event shippers may not receive a total reimbursement. 

How much does it cost?

The costs of shipping insurance coverage will vary with which provider you use, the packages you are sending and how frequently, etc.

Generally, you can expect to pay $0 for values up to $100, with a tiered pricing structure after that. For example, FedEx Insurance charges $3 for values between $100 – $300, and $1 per added value of $100 after $300. UPS Shipping Insurance charges $1.05 per value of $100 above $100. You can also research other third-party shipping carriers; or even a third-party logistics ( 3PL) partner. 

Nonetheless, international shipping insurance is different from domestic shipping insurance. For this coverage, you will likely need to work with a specialty partner.  

Is Shipping Insurance Worth It?

Depending on what you’re shipping, the costs of shipping insurance can add up. Truthfully you will need to do some calculations based on the value of what you’re shipping and how often. In addition, there is a hand full of scenarios where shipping insurance ends up being worth it. 

To start off, online stores and small businesses tend to send packages of higher value often. Higher-order volumes mean that there is a greater chance of a package being lost or damaged. It’s just statistics: eventually, it’s going to happen, and probably more than once. The higher the value of your products, the more you stand to lose. In addition, some items are just more likely to be subject to theft (think of high-end designer brands) and some areas face higher rates of package theft. That being said, it’s worth making sure you understand your product’s full lifecycle so that you can take all the right factors into account. 

Furthermore, customer satisfaction is a critical element of your decision. 70% of shoppers are unlikely to do repeat business with a company after a poor delivery experience. You only get one chance to delight a customer for the first time, and insuring your orders can help you to make things right and keep shoppers loyal. Most savvy retailers will tell you “When in doubt, get shipping insurance”. 

Is your package already covered?

Don’t make the mistake of thinking your package is already covered by shipping insurance. Sometimes people confuse something like USPS certified mail tracking with insurance, and they are not related. 

The fact is that lower-value packages are likely covered by common carriers (such as UPS insurance). Every domestic UPS and FedEx parcel receives coverage against loss or damage automatically up to a value of $100. Similarly, the U.S. Postal Service covers up to $100 on their Express Mail service automatically. If you’re using these carriers and the value of your package is less than $100, you can rest assured that you’re covered. 

Shipping Insurance: A Smart Move for Shippers

Online shopping will continue to increase at a rapid pace. That means more customers than ever are relying on shipments to their doors, leaving a lot of room for something to eventually go wrong when it comes to packages. 

Whether or not to get shipping insurance is a decision that is based on many factors. In our experience, if you’re shipping high-value items or shipping a high volume of packages, shipping insurance is smart. It not only protects your orders. Instead, it also gives you peace of mind that your shoppers are taken care of; as well as knowing that shipping problems won’t end up costing you more. 

You can work with your carrier or 3PL company to determine the best shipping insurance options for you. If you’d like to focus on other aspects of online sales and streamlining your shipping processes, reach out to us. We offer a free consultation where you can gain valuable insights into your business. We are a best-in-class fulfillment company taking a modern approach to online selling – and we can help you to do the same!


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