Shipping insurance reimburses business owners in cases where their products are lost, stolen or damaged during shipment. Most major shipping carriers such as UPS, FedEx and USPS offer this as a value-added feature of their services.
But at what cost and for what return should we expect it?
The Cost
Retailers that regularly ship high-value items may benefit from shipping insurance as an investment. Shipping insurance reimburses for products lost, damaged, or stolen during transit and can help to prevent revenue loss while upholding customer trust in your brand.
Carrier-provided insurance usually costs 1-3% of an item’s declared value and should be included as part of your service agreement. USPS, UPS and FedEx set their insurance rates annually and here’s an estimate for what shipping insurance costs with each carrier:
Shipping insurance costs depend on various factors, including product type, coverage amount purchased and value of goods being shipped. Electronics and jewelry may cost more to ship than clothing or household items and premiums increase as value rises.
Before investing in shipping insurance, consider your average order value and frequency of issue. If your margins don’t allow for covering lost or damaged shipments, insurance might not be appropriate.
If you’re an online retailer that frequently ships high-value products such as electronics or jewelry, shipping insurance can provide peace of mind to both customers and your business. Not only will this help mitigate potential effects on the bottom line if your shipment goes missing or damaged; but it will also give your store an advantage over rival retailers.
Shipping insurance can also be an attractive choice for retailers that sell high-ticket items like furniture or appliances, since replacing an expensive item could easily exceed its initial shipping fee. Furthermore, when consumers purchase such products they want the confidence that their purchases will be protected in case of damage or loss; providing assurance to these types of shoppers through shipping insurance increases customer loyalty – something 41% of shoppers report doing when their order was lost or damaged is crucial in building customer retention and building customer loyalty.
Coverage Options
Shipping insurance comes in many different forms, both through carriers and third-party providers. Major ecommerce carriers generally include built-in insurance options that ship for free with most package shipments; you may opt to add more comprehensive protection by paying an additional fee. Furthermore, third-party shipping insurers typically offer more varied policy offerings while being more affordable than carriers.
Which option you select will depend on the value and volume of goods your business sells, as well as whether or not an established return policy exists. For instance, if your business sells expensive jewelry or electronics items that cost significantly more than others you sell, such as packages of jewelry being lost or damaged during transit would be an immense financial loss for both parties involved.
Shipping insurance generally comes in three varieties, carrier liability, excess liability and replacement value coverage. Carrier liability offers basic coverage up to $100 for small packages and $25/lb. for LTL shipping shipments while excess liability offers more comprehensive protection at an extra premium while replacement value coverage covers costs up to the declared value of an item.
Most carriers charge a flat rate per insured shipment, although some may add incremental surcharges depending on the value of items being transported – for instance USPS charges an additional fee if packages valued over $500. Other carriers such as UPS and FedEx set annual insurance premiums; in 2023 the price to insure a parcel or pallet shipment with UPS was $0.013 per $100 of declared value.
Some sellers arrange and pay for insurance themselves on each package individually; this can be costly. A simpler solution would be offering buyers the ability to buy shipping insurance during checkout; this enables them to pay a small upfront fee and avoid the hassle of filing claims themselves.
Claims Process
Shipping insurance is an optional service that reimburses merchants if their shipments become damaged, lost, or mishandled during transport to customers. Most major carriers and third-party vendors provide some form of coverage; prices for this type of protection can depend on factors like carrier choice and declared value of shipment; but often shipping insurance provides peace of mind that can make up for its additional expense.
Shipping insurance typically costs a percentage of the item’s declared value; DHL Express provides domestic shipments at 3% of value and international at 1%. Furthermore, you may need to pay customs duties and taxes as part of their plan.
Filing a claim may differ depending on your provider. In general, however, a claims agent will review each submission to decide whether it meets criteria and approve or deny. Once approved, funds will generally be returned as quickly as possible; however, larger or more complicated claims may take longer.
Claim processes can be particularly vital when shipping high-value items or those at risk of theft, such as jewelry with an estimated replacement value of $5,000 and it gets lost or damaged during transit, you will need to submit extensive documentation in order to receive reimbursement from your carrier. In these instances, it is often beneficial to partner with a shipping insurance provider with knowledgeable specialists available who can guide you through the claims process.
As a final consideration when purchasing shipping insurance, it’s essential to comprehend the difference between standard carrier liability and excess liability policies. Standard carrier liability only covers up to the item’s declared value minimum; while excess liability covers up to an agreed upon dollar amount or total shipment cost. Understanding differences in claims processes and service costs could have a substantial effect on overall costs associated with insurance for shipping shipments.
Time to Reimbursement
Once a claim is filed and all required documentation provided, reimbursement for your package varies by carrier. Most carriers require that you present a receipt and proof of purchase for the item that was damaged, lost, or stolen during transit – processing a claim can take some time but once complete it should usually happen fairly quickly so you can start receiving your reimbursement.
Keep in mind that third-party providers of shipping insurance may take longer to process claims compared to carriers directly, so choose wisely! Aim for one with established roots that offers responsive customer service as well as peace of mind knowing your claims will be processed promptly and efficiently.
Shipping insurance offers both you and your customers peace of mind that should a package go missing or get damaged during transit, this can be especially valuable if your products or business relies heavily on shipping to get their products to their customers on time.
Many major shipping carriers offer some form of insurance option and third-party providers also provide this coverage. While the price varies based on carrier and declared value, insurance can provide peace of mind that could potentially save your business from potential costs associated with losing or damaging shipments.
Most ecommerce businesses will offer customers the option to add shipping insurance at checkout for an additional fee, which can help drive sales growth and customer satisfaction. Offering this option to customers when selling more expensive items may be worth the additional expense in order to guarantee they have a positive shopping experience.
At Shippo, we partner with XCover to offer shipping insurance at very competitive rates for our customers. Domestic packages cost only 1.25% of value with no minimum fees required and for international packages it charges 1.50% with no deductible fee required; there may be one 25% deductible applicable only in rare instances (watches, jewelry, artwork and ceramics), yet overall this option offers excellent value for any business.