Shipping Insurance: Defined, Types, & Cost

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If you’re shipping anything of value, you want it to arrive in a safe and timely manner. Especially as a merchant or eCommerce business, shipping products successfully can be the difference between a good financial year and a great one. The continual increase in online shopping highlights the importance of insuring packages. The growth we once saw over the course of a decade occurred in just three months in 2020. As a business owner, shipping protocols and best practices can get pretty complicated, especially if you ship products like alcohol that tend to feature more shipping restrictions. With so many elements that can go wrong during shipping, taking steps and insuring a package is always a good (and lucrative) idea. Shipping with insurance might seem complicated or overwhelming to some, but once understood, it can make or break your efforts to satisfy customers. If you’re looking to learn more about insuring a package for shipment, keep reading. We’re covering:

What is Shipping Insurance?

In simplest terms, insured shipping is the protective measure of securing products for shipment. Package insurance can protect goods from a variety of unfortunate circumstances, including theft, damage, improper handling, and more.

Shipping insurance assumes financial responsibility for goods up until they arrive at the designated shipping location. Especially for exporters, the numerous steps and stages in the shipping process can result in complications during delivery. Having a safety net in place for these circumstances is priceless. Instead of losing shipping fees on goods that weren’t delivered correctly – potentially costing you revenue – insuring a package means exporters can trust a shipper to assume financial liability.

Benefits to Shipping Insurance

There are several benefits to using shipping insurance, but these 4 are the ones that make insuring a package well-worth the additional cost. 

  1. Save money in the long runYes, you will pay to insure packages, but in the long run, the practice can actually save you money. Shipping insurance means preventing additional costs associated with loss and/or damage to packages and products. 
  2. Enhanced customer satisfactionCustomer satisfaction is a top priority for all business owners, in any industry. When shipments arrive on time and in perfect condition, your customers will be happy and are more likely to become repeat customers. 
  3. You want to grow – and that means more riskAlmost every business wants to expand, but if you’re selling – and shipping – more, that also means more risk for things to go wrong. Rest easy as you grow your brand by trusting that when the occasional mishap occurs, you’re covered.
  4. Worry about the big stuffYou’re a busy business owner, and if you’re like most others, you often feel like you don’t have enough time in your days. Give yourself the luxury of time to work on the big stuff by insuring packages before you ship them. When you’re not worrying about your shipping process or getting products to your customers, you’ll free up time, energy, and resources to focus on the things that really matter.

What Does Shipping Insurance Cover?

With increased online sales comes an increase in shipping with insurance options that eCommerce and online merchants can use to their advantage. The situations covered by insured shipping will vary widely based on the shipping insurance policy chosen and the shipping company providing the services. Typically,  package insurance covers incidents in which the seller has no control, such as delivery delays, damage to goods, or shipping malpractices before delivery. Each provider has unique requirements, restrictions, and coverage details that sellers should consider before choosing their preferred insurance provider.

UPS Shipping Insurance

The United Parcel Service (UPS) is a common, reliable choice for those purchasing shipping insurance. UPS offers insurance through UPS’ licenses affiliate, UPS Capital Insurance Agency, Inc. UPS Capital coordinates insurance details to make sure customers get a great policy based on current shipping needs, with online quotes available through InsureSheld Instaquote. In addition to insurance options, UPS also allows customers to declare an item’s value, with a certain level of coverage already provided (but not necessarily including additional insurance). 

UPS can be a bit particular about using their designated insurance company to ensure goods are properly shipped, but they also have a few limitations to coverage that should be noted. UPS does not assume liability for loss or damage resulting from: 

  • Improper packaging
  • Checks 
  • Data stored on media
  • Perishable commodities
  • Natural disasters
  • Acts of God
  • And

FedEx Shipping Insurance

FedEx, like its competitors, offers customers the ability to get package insurance for items if they’d like to guarantee parcels will arrive safely on time. Every package has an automatic coverage of $100. If the declared value of the parcel is higher, additional coverage can be easily purchased in-person or online. If you decide to insure a package, you must declare its value. Different values will determine specific levels of coverage.

FedEx is also particular about how you declare the value of items. They also have maximum value limits on select goods, such as items of extraordinary or hard-to-determine value. These items might include artwork, antiques/collectibles, precious metals, and more. 

While this doesn’t mean they’re outright denied insurance on packages, it might mean an item’s full value may be lost if there are issues with the delivery. Additionally, if an item arrives broken but can be repaired by the seller, FedEx will not assume liability for the failed delivery.

United States Post Office Shipping Insurance(USPS)

If you’re looking to the United States Postal Office for shipping insurance, you’ll be in experienced and trustworthy hands. USPS covers up to $5,000 for goods or products that are lost, managed, or missing while in their custody, and customers interested can purchase package insurance in-person or online. Additionally, certain mail classes – like Priority Mail and Global Express Guaranteed – will automatically include an amount of insurance coverage.

If you’re in a time-sensitive industry or need something sent quickly and reliably, the USPS may not be the best option for insuring a package. USPS doesn’t cover expedited delivery or guarantee delivery times. Shipping times can vary and express shipping isn’t a cost that would be compensated if a shipment arrives late. Quick shipping has become a huge selling factor for consumers, with two-day shipping becoming the gold standard. While USPS has options to send your goods quickly, they won’t front the bill if something gets delayed along the way. 

DHL Shipping Insurance

Especially common for international shipments, DHL is another reputable carrier that provides comprehensive insurance for packages. Merchants who ship with DHL feel assured their delivery will run smoothly. 

Through DHL Shipment Value Protection and DHL Security Services, shippers can get protection against physical loss and damage during transit. Special security services are in place to ensure that customer assets are protected throughout the entire delivery and supply chain process. DHL also boasts a quick customer satisfaction rate, with most customers compensated for issues within 30 days.

Unfortunately, if the value of your item is less than $100, DHL does not assume automatic liability at no charge. To guarantee that any level of return will take place, you must purchase insured shipping at an extra cost. DHL also doesn’t provide coverage for items indirectly lost or damaged or that are lost or damaged due to delays. Like USPS, DHL can be a great option if you’re looking to ship to a specific international location – but keep in mind, they won’t guarantee timely delivery.

How Much Does Shipping Insurance Cost

Shipping insurance costs will vary widely depending on the type of parcel being sent, how frequently shipments are made, and the value of the shipment. Each carrier offers  competitive insurance rates, with DHL being the unique outlier due to the nature of international shipments and the factors that go into customs clearance.

USPS Insurance

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

UPS Insurance Costs

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

Third Party Shipping Insurance

While we’ve touched on the major carriers that provide insured shipping, let’s also remember the amazing third-party shipping insurance options available. Every business is different, with individual  shipping needs that may be better addressed with a third-party provider. There are many advantages to choosing third party shipping insurance, including the ability to insure items among all major carriers and submitting unknown carriers for approval. The third-party nature of these options allows sellers to have a single point of contact for any issues that come up and features great tracking software that offers additional peace of mind. 

These features can save online sellers countless profits in the long run, so understanding all options before deciding who to use when shipping with insurance is crucial. Some of the most popular third-party shipping insurance companies include:

  • Route: The worst part about shipping complications is being unaware of where the parcel is located within the shipping process. This is where Route steps in and allows your shipping services to thrive. Route’s insurance policy and contract feature a modern tracking experience that provides the seller and consumer peace of mind. Customers and sellers can easily report issues through the Route app, reducing delivery delays and potentially saving merchants thousands in profit.
  • Shipsurance: Featuring competitive insurance rates that are frequently 90% less than competitive carriers, Shipsurance seeks to become a business partner rather than solely an insurance provider. Shipsurance is an insurance agency, not a shipping service, allowing them to save money and provide lower insurance rates. They ditch declared value at the door, insuring a package by employing a collective team of experienced shippers to get items delivered correctly and cost-effectively.
  • eCabrella: This shipping software company offers an alternative option by providing insurance on packages with competitive rates and customized parcel insurance plans that complement your business’ specific shipping process. International and domestic shipments are equally protected, and shipment restrictions are minimal.
  • Parcel Insurance Plan: PIP insures lost and damaged packages domestically, with international options also available. They provide insurance for packages on numerous articles other carriers do not, such as electronics, cell phones, jewelry, and more. PIP is perfect for those who know they’re shipping goods that get a little complicated with the major carriers.

Let ShipCalm Help You With Your Shipping Needs!

Insured shipping management can be complicated, with countless delivery and shipping factors to consider in choosing the best delivery practices and shipping with insurance. Guaranteeing that customers get their orders as expected is crucial for business growth and prosperity, and choosing to insure these items allows you to reduce sunken costs. 

ShipCalm is a third-party logistics (3PL) company that understands the full scope of inventory and shipping management. Our Fulfillment Services are extensive, helping business owners focus on quality customer service while we focus on product delivery. Request a custom price from ShipCalm today, or contact us to learn how we can innovate and simplify insured shipping services for your business!

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