Shipping Insurance
Also known as: Parcel Insurance, Carrier Insurance, Declared Value Coverage
Definition
Shipping insurance protects the value of your package if it’s lost, damaged, or stolen during shipping. While carriers have liability limits, insurance ensures you’re fully covered for valuable shipments.
Carrier Liability vs. Insurance
Carrier Liability (Free):
- USPS: $100 for Priority Mail, $50 for others
- UPS: $100 declared value included
- FedEx: $100 declared value included
- Limited coverage, restrictive claims process
Purchased Insurance:
- Covers full declared value
- Broader coverage terms
- Often easier claims process
- Costs 1-3% of value
Insurance Cost Comparison
| Declared Value | USPS | UPS | Third-Party |
|---|---|---|---|
| $100 | Included | Included | ~$1 |
| $500 | ~$5 | ~$6 | ~$4-5 |
| $1,000 | ~$10 | ~$12 | ~$8-10 |
| $5,000 | ~$50 | ~$60 | ~$35-45 |
Third-party insurance (Shipsurance, U-PIC, InsureShip) often offers better rates.
What Insurance Covers
Typically Covered:
- Physical damage during transit
- Lost packages
- Stolen packages (with proof)
- Weather damage
Often Excluded:
- Improper packaging
- Pre-existing damage
- Perishables and consumables
- Inherent vice (items that damage themselves)
- Certain high-risk categories
When to Use Insurance
Always insure:
- High-value items ($200+)
- Fragile items
- Electronics
- One-of-a-kind items
- International shipments
- Items customers can’t easily replace
Consider skipping:
- Low-value, replaceable items
- When self-insuring makes sense
- Large volume with low loss rate
Self-Insurance Strategy
For high-volume shippers:
Instead of insuring every package, set aside a percentage of shipping revenue to cover losses. If your loss rate is 0.5%, self-insurance may cost less than paying premiums.
Example:
- 1,000 packages/month
- 0.5% loss rate = 5 packages
- Average value $50 = $250 loss
- Insurance would cost $500+
- Self-insurance saves money
Filing Insurance Claims
Required documentation:
- Tracking showing non-delivery or damage
- Original receipt or invoice
- Photos of damage (if applicable)
- Packaging photos (proves proper packing)
- Claim form completion
Timeline:
- File within 60-90 days of ship date
- Carrier investigation: 5-30 days
- Payment: 5-10 days after approval
Third-Party Insurance Providers
| Provider | Strengths |
|---|---|
| Shipsurance | Low rates, broad coverage |
| U-PIC | Jewelry, high-value specialists |
| InsureShip | API integration |
| ParcelGuard | Multi-carrier support |
These often integrate with shipping software for automatic coverage.
Insurance for E-commerce
Best practices:
- Build insurance cost into product pricing
- Offer optional insurance at checkout
- Always insure high-value items
- Document packaging procedures
- Take photos before shipping