No matter how sound your logistics processes are, with packages flying all over the place — especially during peak season — there’s always the possibility of something going wrong. Packages get misplaced, damaged or lost in transit all the time, but shipping insurance is a way to protect both you and your customers from a number of unpredictable events. In this article we will break down everything you need to know about shipping insurance and why it’s important for all online businesses.
Shipping insurance is a financial protection service which can be purchased by shippers or recipients that covers lost, stolen, or damaged shipments during transit. In the event of accidents, theft, or unforeseen circumstances, the insurance will compensate the business or customer for the declared value of the goods.
Shipping insurance safeguards against financial losses, and provides peace of mind for both sellers and buyers in the shipping process. It's an investment to mitigate risks and ensure the safe and secure delivery of goods from the sender to the recipient.
The main purpose of shipping insurance is to provide financial protection against unexpected events; such as loss, theft or damage. However for online businesses, shipping insurance provides an extra layer of trust between the seller and consumers. Without insurance, unforeseen events could result in financial losses for either party. While loss or theft in the shipping process is unwelcome regardless, financial compensation helps the shipment be replaced or reimbursed.
Shipping insurance is also important because it helps streamline claims and resolutions in case of mishaps, which facilitates a smoother resolution process and protects businesses against losing customers. Overall, shipping insurance is an essential tool to mitigate risks, build customer trust and ensure the secure transportation of goods.
Shipping insurance usually covers the following:
Shipping insurance is unlikely to cover the following:
There are a number of insurance policies you can take out when organising shipping insurance, depending on the value of your shipments and international requirements. In general, you can organise shipping insurance through the carrier (ie. Royal Mail, DHL, FedEx) or through third-party insurance companies (Arpin International Group, InsureShip, U-PIC).
Some specific kinds of coverage include:
For international shipments, there are a number of more specific shipping insurances to ensure a safe and secure transit. Marine cargo insurance is specifically designed for goods transported over sea routes, providing coverage against sinking, fire, and piracy during the ocean transit. International Shipping Insurance is a coverage that extends from the seller's location to the buyer's, including all modes of transportation (sea, air, land) and any intermediate storage. This kind of international shipping insurance offers seamless and continuous protection throughout the whole shipping process.
So, how does the whole process work? It will usually start with the seller reaching out to either their carrier or a third-party to discuss whether your business is eligible for insurance. If so, it’s then possible to narrow down which kind of insurance is best in terms of shipment value, size and distance. Once a policy has been outlined, the insurer will then pay a premium to ensure the financial protection of goods.
However, in the case of loss or damage on route, the insurer will need to file a claim either by phone, email or mail which will then be processed by the insurance company. The insurer will need to provide some kind of proof of policy and be able to prove that the package was lost or damaged in transit in line with the agreement. If the insurance company agrees that the policy in place covers the claim, the insurer will be compensated the pre-agreed upon amount.
There are a number of factors that can affect the premium the insurer pays for the insurance. For example, high-value, fragile, or hazardous items often command higher premiums due to the bigger risk of damage or loss. International shipping by land, sea, or air can affect the risk assessment. Longer journeys or risky routes prone to natural disasters, political upheaval and piracy can result in a more expensive premium. Lastly, if the insurer has a history of filed insurance claims, then this too could result in higher premium.
When choosing shipping insurance you will need to consider the types of coverage available and if they are suitable for your businesses and goods. You will need to review policy thoroughly for any exclusions and limitations to understand what risks are not covered by the company. Evaluate how easy it is to make a claim, and understand which deductibles you will be responsible for. Higher deductibles can result in a lower premium, but may leave you out-of-pocket when it’s time to file a claim.
Whether or not to purchase shipping insurance is usually based on the value of the item being shipped. For e-commerce businesses who trade in jewellery, electronics, designer apparel, antiques and other highly valued items, shipping insurance is very important. If the loss of your goods causes significant financial pain, then it’s probably worth making a few enquiries. Failure to secure a policy could result in significant financial losses for either the buyer or shipper.
Furthermore, if a shipment has to travel a long way and pass through multiple warehouses and ports, the more likely it may get lost or damaged in transit. As a result, e-commerce businesses who regularly ship internationally would benefit from some form of shipping insurance. Lastly, when customers spend a lot of money online, they expect their purchases to arrive on time and in one piece. As a result, providing shipping insurance on all sales can provide a sense of safety and trust that can improve customer relationships.
There are countless real-world scenarios where shipping insurance can prove beneficial for both e-commerce stores and customers. Here are four possible scenarios where shipping insurance can help:
When it comes to logistics and international shipping, anything can happen, but shipping insurance offers e-commerce stores peace of mind and a way to securely transport items to their destination safely and without incurring major financial losses.