Shipping insurance can protect both you and your customers from unfortunate losses and disagreements. But shipping insurance costs money, and as an e–commerce business, your operational costs are already high. 

Do you need shipping insurance? Should you use it for shipments to customers, or only for inbound shipments from your suppliers? 

Is the expense worth it in the long run?

In this post, we’re diving into all of the commonly asked questions surrounding shipping insurance.

What is shipping insurance?

Shipping insurance is a type of policy that covers lost, stolen, or damaged shipments during transit with a Carrier. A shipper can purchase coverage for a single package, a group of packages, or a large cargo or freight shipment. 

Shipping insurance is commonly purchased for valuable items. A business could purchase the insurance and add the hidden cost to the price of the item. Consumers can also purchase shipping insurance when sending a valuable package, such as a jewelry gift to a friend, or when shipping items during a move to another city. 

How much does shipping insurance cost?

The cost varies based on the value of the item and the volume of the shipment. Consumers purchasing shipping insurance for one package will typically pay a higher rate than an e–commerce company sending a large group of packages or regular monthly packages. That’s because many shipping insurance providers offer a volume discount. 

P.A.F. Insurance serves e–commerce companies and suppliers. The insurance provider offers large discounts via wholesale rates

While businesses will typically purchase from a separate insurance provider in order to access volume discounts and wholesale rates, consumers usually purchase directly from the Carrier.

For example, the United States Postal Service will insure a $100 product for $2.05. Carriers around the world will all have their own offers which you can purchase for individual shipments. UPS offers free coverage for up to $100 in value. DHL offers shipment insurance for 10 euro or 1% of the stated shipment value, whichever is higher.

For all Carriers, the higher the product value, the higher the insurance cost.

USPS Shipping Insurance
USPS Shipping Insurance

As a small e–commerce sellers shipping orders infrequently, you might choose to purchase shipping insurance from a Carrier. But if you ship orders frequently and also ship via cargo and freight, then you might want to go directly to an insurance firm for a bulk deal. 

How does shipping insurance work?

Shipping insurance must be purchased up front before the shipment is sent, and cannot be purchased after damage or loss occurs. You can purchase shipping insurance from a Carrier directly (such as UPS or FedEx), or you can purchase it from an insurance provider.

If you need shipping insurance for cargo or freight, you need to contact an insurance provider. If you want insurance for package shipments to customers, you can likely get it from the Carrier. However, if you ship expensive orders frequently, you may want to contact an insurance provider for a quote. You might be able to get a volume deal. 

If your item is lost or damaged during the shipping process, you’ll then be eligible to file a claim for the full value of the lost goods. Of course, every company has certain goods they don’t cover (such as perishables), so make sure to buy the right type of insurance up front so you can get your money back in the event of loss or damage.

When should you get shipping insurance?

Should you buy shipping insurance? You likely don’t need to get it for every single shipment. 

Here are some factors that will help you decide whether to purchase insurance or not:

Product costs

The most important factor in determining whether or not you should purchase shipping insurance is the cost of your products. Let’s say you sell both costume jewelry and fine jewelry. You might decide to only insure the fine jewelry shipments to customers, because losing the item would represent a large monetary loss.

On the other hand, let’s say only one out of every 150 costume jewelry orders gets lost in the mail. It’s cheaper to just take the hit of the loss rather than insure every parcel. 

International shipping

International shipments are more prone to getting lost and damaged simply because they travel farther and will undergo multiple types of carrying. If you frequently ship internationally, you should contact one of the shipping insurance providers listed below for a quote. You might be eligible for discounted rates depending on your number of monthly shipments and the product values.

Customer expectations

If a customer’s order is lost in the mail, they will expect a free replacement. Large corporations offer this, and so customers now expect this of smaller companies as well.

Depending on the value of your products, shipping insurance can allow you to provide reimbursement or item replacements at a lower cost than if you were to shoulder the burden alone. 

What does shipping insurance cover?

Every shipping insurance provider will have their own guidelines of what is covered, so when shopping for insurance make sure that you check what is covered. 

Here’s an example of what insurance provider company U-PIC covers:

THE COVERAGE INSURES the parcel and its contents against damage or loss from any external cause while in transit to, or from, premises utilized by the Insured and in care, custody, or control of Carriers listed within the United States of America (including its possessions and trusts) and Canada EXCEPT as hereinafter excluded. Underwriters shall be liable for the invoice value of property lost, destroyed, or damaged; in the event there is no invoice, the Underwriters shall be liable for the actual cash value of the property.

Some of the things that aren’t commonly covered are furs, original or fine art, tickets, and perishable cargo.

When researching providers, be sure to not only look at the type of damage that is covered, but also what is not covered. 

How do you file claims?

Do you need to file a claim for goods that were lost or damaged during shipping? Here’s how.

  1. Login to your insurance provider – Most insurance providers today have an online portal. You should have created a login profile when signing up. If you don’t have this information, contact their support.
  2. File a claim with the requested information – Login and file a claim with the company’s online portal. Provide the requested information include the item’s tracking number, the Carrier (if filing a claim with an insurance provider), the product value, and the date it was shipped.
  3. Use your claim number to track progress – While your claim number will likely be accessible in the platform, you might also want to take note of it elsewhere. In case you don’t receive a prompt reimbursement, reference this number when communicating with the support or insurance agents.

What are some of the options for shipping insurance firms?

Conduct your own research to find the right shipping insurance provider for your e–commerce business. We’ve listed out some of the better known firms. Use this list as a starting point for researching your options.

1. U-PIC

U-PIC, shipping insurance provider

U-PIC provides shipping insurance for single packages, multiple packages, or regular and reoccurring shipments. You can request a quote for your first shipment and continue to purchase individual shipping coverage, or set up a monthly commitment. 

2. UPS Capital

UPS Capital, shipping insurance provider

UPS Capital is another great option for purchasing shipping insurance. You can buy coverage for a single shipment, a group of packages, or for your inbound or outbound cargo and freight shipments. For example, you might want to protect an inbound shipment from a supplier. Or, you might want coverage for an outbound shipment to a warehouse in a different market. Get a quote here.

3. P.A.F. Insurance

P.A.F, shipping insurance provider

P.A.F. Insurance offers shipping insurance for individual shipments and for freight and cargo. Their specialty however is in large volume shipments for inbound and outbound product movements. Learn more.

4. GLS Group

G.L.S. shipping insurance

GLS Group offers shipping services for businesses. They primarily operate in Italy and other countries in Europe. Shipments come with base insurance, but you can purchase additional insurance for costly goods. Learn more.

5. UPakWShip

UPakWShip shipping insurance

UPakWeShip is UK-based shipping insurance company that offers international shipment coverage. Their rate is 2.5% the cost of the goods for shipments below £30,000, and 2% the cost of the goods for shipments above £30,000. Learn more.

Meet ShippyPro’s shipping automation

Customers expect a great shipping experience. They want shipping options that fit their needs, proactive tracking, easy returns, and fair reimbursement. 

You can easily manage shipping with ShippyPro’s automation features. We integrate with all popular Carriers in the US and Europe so you can offer all of the above to your customers.

Learn more about ShippyPro and start your 30 days trial for free.