SHIPPING INSURANCE: Definition, Coverages, and Benefits

Shipping Insurance

Despite the fact that major shipping providers are generally dependable, shipments can get lost and damaged, and e-commerce businesses must be prepared when this occurs.
According to a recent survey, when e-commerce shipments are damaged or delayed, 53.1% of shoppers expect expedited shipping on replacement products and 43.9% expect refunded or discounted shipping fees.
This means that many e-commerce retailers will be forced to cover the whole cost of damaged or undelivered products. Instead of paying for losses out of yourself, you may insure your deliveries. Continue reading to learn about the cost and total worth of shipping insurance. We’ll look at the costs of using UPS, USPS, and FedEx shipping Insurance.

What is Shipping Insurance?

Shipping insurance, in its most basic form, is a safeguard for safeguarding goods before shipment. It can cover commodities from theft, damage, incorrect handling, and other undesirable occurrences. Shipping insurance bears financial responsibility for these products until they reach the authorized shipping place.

Especially as an exporter, there are several processes and stages of the shipping process that might cause delivery issues, and having a safety net in place for these instances is invaluable. Instead of paying shipping fees for items that were not delivered correctly and losing potential revenue, the exporter can be confident that the shipper will bear financial responsibility.

What Does Shipping Insurance Cover?

As online sales rise, so do shipping insurance alternatives for e-commerce businesses and online merchants to take advantage of. The conditions covered by shipping insurance will vary greatly depending on the shipping insurance policy chosen and the shipping firm providing the services. Shipping insurance typically covers situations over which the seller has no control, such as delivery delays, damage to products, or shipping malpractices that occur prior to delivery. Each provider has its own set of regulations, restrictions, and coverage information that sellers must evaluate before deciding on their preferred insurance provider.

What Is the Purpose of Shipping Insurance?

Shipping insurance is vital since it can offer you relief and insurance. You won’t have to worry about the item becoming lost or ruined when traveling. It can assist you in ensuring that you receive the income you deserve from your sales.
Shipping insurance is one of the most valuable services that sellers can purchase in order to provide security for both the customer and the seller. Shipping insurance is one of the most valuable services that sellers can purchase.

Benefits of Shipping Insurance

#1. Complete protection

With shipping insurance, you won’t have to wonder if and how much your packages are protected. You can be confident that your shipments are secure, and you have the freedom to specify the amount you want to cover. You can also choose coverage rules based on SKU, order value, or geography. Even if you are shipping high-value, fragile, time-sensitive, or perishable items, you can rest assured that your products are insured.

#2. 100% refund and quick reshipment

Financial loss due to shipping replacement merchandise is cited as a major challenge by 51% of small and medium-sized businesses (SMBs). Consumers expect businesses to resolve problems as soon as possible. 38% of customers are inclined to blame the firm they purchased from for any shipping issues. The good news is that with shipping insurance, you can promptly reship replacement goods, refund, or credit your customer with greater assurance that the associated expenses may be covered while putting less risk on your bottom line.

#3. Fast and simple claims

When it comes to shipping, the claims experience may be a huge pain point for businesses, with 65% of SMBs seeing a lengthy claims procedure as a top annoyance. With InsureShield® shipping insurance, you can easily file a claim online and, if granted, have the claim paid in days rather than weeks.

#4. Peace of Mind

With shipping insurance, your company can not only enjoy a simple claims process, but you can also ship with confidence knowing that your things are insured up to the full retail value. Nearly 70% of SMBs believe insurance can help businesses provide better customer service. Maintain client loyalty by offering an outstanding shipping experience. You can have the best of both worlds: peace of mind for your business and peace of mind for your clients.

#5. Bottom Line and Reputation Protection

If they have problems with their shipping, 37% of customers are less inclined to buy from a small business again, resulting in $56 billion in potential lost sales each year. Businesses, on the other hand, may recoup $35 billion in potential lost revenue by enhancing the shipping experience for customers. With shipping insurance, your company can safeguard both its bottom line and its reputation.

UPS Shipping Insurance

The United Parcel Service is a popular option for individuals looking to buy shipping insurance, and they are a dependable carrier for those looking to protect their goods. With UPS Capital Insurance Agency Inc., a licensed subsidiary of UPS, insurance is offered. UPS Capital coordinates insurance data to ensure that customers get an excellent policy based on their current shipping needs, with InsureSheld Instaquote providing online quotations. They also offer clients the option to declare the worth of their goods, with a certain amount of coverage already provided, but without necessarily purchasing insurance.

UPS can be fussy about utilizing their chosen insurance firm to guarantee products are carried out properly. However, they also have some coverage limitations that should be considered before selecting UPS as a preferred carrier. UPS disclaims responsibility for loss or damage caused by faulty packaging, checks, data held on media, perishable goods, natural catastrophes, Acts of God, and other factors. If you’re shipping things that aren’t on UPS’ long list of articles that pose issues, they might be a carrier to consider.

FedEx Shipping Insurance

FedEx, like its competitors, allows consumers to purchase coverage for their things if they want to ensure that the parcel arrives safely and on schedule. So, every box comes with $100 in coverage by default, and if the claimed worth of the parcel is greater, additional coverage can be readily acquired in-person or online. When a consumer purchases shipping insurance for an item, they must declare its worth, with varying values assigned to different levels of coverage.

FedEx is extremely picky about how consumers declare the worth of their commodities and has maximum value limits on certain goods, such as items with unusual or difficult-to-assess value. These things include artwork, antiques/collectibles, precious metals, and more. While this does not mean they are flatly denied insurance, it does imply that the full value of the item may be lost if there are complications throughout the delivery process. Furthermore, if an item comes damaged but can be repaired by the seller, FedEx will not accept responsibility for the failed delivery.

US Postal Service (USPS) Shipping Insurance

If you seek the United States Postal Service for shipping insurance, you’ll be in capable and dependable hands. Customers who are interested can purchase this shipping insurance in person or online. USPS covers up to $5,000 for items or products that are lost, mishandled, or go missing while in the possession of the USPS. Furthermore, certain postal classes, such as Priority Mail and Global Express Guaranteed, will automatically contain an amount of insurance coverage.

If you work in a time-sensitive business or require something to be delivered quickly and reliably, the USPS may not be the best option for insurance. Because USPS does not offer accelerated delivery or guaranteed delivery times, shipping times will vary, and express shipping will not be paid if the package arrives late. Consumers now place a high value on fast shipping, with two-day delivery being the gold standard. Although USPS has options for expediting delivery, they will not cover the cost if something goes wrong along the route.

DHL Shipping Insurance

DHL is another reputable carrier that provides complete insurance solutions for businesses to help them feel certain that their delivery will go smoothly. Customers can acquire protection against physical loss and damage during transit with DHL Shipment Value Protection and DHL Security Services, with unique security services in place to ensure that customer assets are secured throughout the whole delivery and supply chain process. DHL also has a high record of customer satisfaction, with clients being paid for problems within 30 days.

Sadly, if the value of your goods is less than $100, DHL will not accept automatic liability at no cost to you. So, to ensure that any amount of return occurs, get shipping insurance at an additional expense. DHL also does not cover things that are lost or destroyed indirectly or items that are lost or damaged as a result of delays. Similar to USPS, it’s a good alternative if you want to ship to a specific international area, but it doesn’t guarantee rapid arrival.

How Much Does Shipping Insurance Cost?

USPS Insurance

Value of ContentsUSPS Insurance Cost
Items up to $50$1.65
Items $50.01 – $100$2.05
Items $100.01 – $200$2.45
Items $200.01 – $300$4.60
Anything over $300 – $5000$4.60 + $0.90 per $100 increase

FedEx Insurance

Value of ContentsFedEx Insurance Cost
Up to $100$0
$100.01 – $300$3
Every additional $100 after $300$1

UPS Shipping Insurance Costs

Value of ContentsUPS Insurance Cost
Up to $100$0
Every additional $100 afterward$1.05

Third-Party Shipping Insurance

While we’ve discussed the big carriers that offer shipping insurance, don’t overlook some of the fantastic third-party shipping insurance solutions available to merchants. Each firm is unique, with distinct shipping requirements that may be better met by a third-party source. There are numerous benefits to using third-party shipping insurance, including the option to insure items across all major carriers and to submit unknown carriers for approval. The third component of these alternatives allows sellers to have a single point of contact for any difficulties that arise, as well as superb tracking tools that provide merchants with additional peace of mind.

These features can save online merchants thousands of dollars in the long run, so knowing all of your options before deciding on an insurance provider is critical. Some of the most well-known third-party shipping insurance providers are:

#1. Route

The worst aspect of shipping issues is not knowing where the parcel is in the shipping process. This is where Route comes in and helps your shipping services thrive. Route’s insurance policy and contract include a sophisticated tracking experience that gives both the vendor and the buyer peace of mind. Consumers and sellers may simply report difficulties via the Route app, eliminating delivery delays and potentially saving thousands of dollars.

#2. Shipsurance:

With competitive insurance prices that are frequently 90% lower than competing carriers, Shipsurance aspires to be a business partner rather than just an insurance provider. Shipsurance is an insurance agency rather than a shipping business, which allows them to save money and offer reduced insurance prices. They forego declared value and insure parcels by utilizing a collective team of experienced shippers with the goal of getting items delivered correctly and cost-effectively.

#3. eCabrella:

This shipping software company provides customers with an alternative option to major couriers by providing competitive rates and customized parcel insurance plans that complement your business’ specific shipping process. Foreign and domestic shipments are equally protected, with few limits.

#4. Parcel Insurance Plan

PIP insures lost and damaged packages domestically and internationally. They cover a wide range of items that other carriers do not, including gadgets, cell phones, jewelry, and more. PIP is ideal for individuals who know they’ll be shipping things that are a little more problematic with the major carriers.

Who is In-Charge of Shipping Insurance?

When it comes to shipping insurance, there is no hard and fast rule about who should pay shipping insurance. Also, recognize that if you compel the buyer to pay, they may opt not to. In this instance, although you will be under no responsibility to replace the item if it is lost, damaged, or stolen, recognize that the consumer will expect you to do so nonetheless.

Although you are not required to do so, keep in mind that refusing to replace their goods may result in a negative rating from them. As a result, many merchants will pay for shipping insurance so that they can replace the item without losing money on shipping.

How Can I Make Certain that a Package is Shipped?

The easiest approach to ensure that an item is dispatched and arrives safely at its destination is to provide tracking information with the shipment. Most shipping firms will provide it automatically, while others may charge a fee for tracking.
Whatever the cost, having tracking information is the greatest way to avoid being cheated by clients who say they never received goods and request a replacement.

Do Third-Party Logistics Providers Manage Shipping Insurance?

Some third-party logistics (3PL) firms do, while others do not. Furthermore, some 3PLs will provide insurance but will expect the seller to manage claim processing on their own.

Is It Worthwhile to Get Shipping Insurance?

Depending on your shipping volume and the value of your merchandise, shipping insurance may be worthwhile. The likelihood of a standard letter or package being lost or damaged is low. But, if you are shipping a large number of valuable things, shipping insurance will most certainly pay for itself.

The casual shipper

Unless the products are exceptionally valuable, the average person sending a letter or package does not need shipping insurance.

The commercial shipper

Commercial shippers, on the other hand, are continually shipping valuable things. Increased order volume indicates that some of your packages will eventually be lost or damaged. And the more valuable your items are, the more you stand to lose. Shipping insurance may be a no-brainer for online businesses shipping high-priced commodities.

The rule is the same for both casual and business shippers: if you believe you might require shipping insurance, buy it. It just costs a few dollars, and if your package is valuable enough that you’re considering insurance, the modest investment is worth the potential ups and downs if something goes wrong.

What is the Alternative to Shipping Insurance?

Many firms rely only on declared value/carrier responsibility to protect their goods. Sadly, many firms may not realize that declared value/carrier liability insurance is not true insurance.

Carrier liability is the standard liability provided by a carrier for a shipment in the event of loss or damage (e.g., up to $100 for a small item or $25/lb. for LTL). Extra liability is excess-value coverage (i.e., more than the carrier’s ordinary liability), up to the cost of the shipment. Carrier responsibility is based on fine language and a tangle of controlling statutes, some of which date back to the 1930s. The statutes allow carriers to restrict their exposure and avoid liability in a variety of situations.

When it comes to carrier liability, the shipper must prove that the loss or damage occurred while the goods were in the carrier’s physical control. Carrier liability does not extend to hidden damage. Furthermore, the claims process can be time-consuming and taxing.


According to a recent report, 70% of customers are unwilling to shop from an online store again after a bad delivery experience. Although lost and damaged shipments are unavoidable, you can still win back clients by immediately reimbursing or replacing the items. You can do so without incurring a loss thanks to the shipping insurance.


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