While most eCommerce businesses collaborate with trusted shipping carriers, the chance of packages getting lost or damaged remains present. In the case of damaged or undelivered packages, customers seek reimbursement options such as refunding, expedited shipping of the replacement, or cutting down on the shipping cost.
To cost-effectively deal with such mishaps, businesses need a better plan than covering for damaged orders on their own. Shipping insurance is an effective way of managing shipping-related setbacks, and in this blog post, we will discuss if it is worth getting insurance and the cost of shipping insurance offered by major carriers.
What is Shipping Insurance?
Shipping insurance is a service that provides financial protection to shippers in case of loss, stealth, or damage to customers’ ordered packages. If an insured ordered package either fails to be delivered at its destination or is delivered in a damaged or broken state, then the shipper is saved from loss by reimbursement of the declared value of items within said package.
Research surveys have found that more than half of the customers will not shop from an eCommerce store if they have had even one bad delivery experience. While loss or damage of some packages is unavoidable at times, loss of customers shouldn’t be a consequence, and the only way to win them back is by promptly offering reimbursement, which is easier when you have shipping insurance to back you.
How does Shipping Insurance Work?
If a package is lost, stolen, or delivered in a damaged state, you need to file a claim with your shipping carrier or insurer to get reimbursement. For this, you will need to submit relevant documents that prove the financial worth of the items. Typically, a claim to process takes a few days, but in some cases, the shipping carrier may take up to 10 days to locate a package if it was undelivered and tagged as lost or stolen.
What is the Cost of Shipping Insurance?
Shipping carriers are the companies that businesses partner up with for the shipping and delivery of packages to customers. Shipping carriers are either long-range carriers, that offer door-to-door delivery services and offer order shipments to anywhere within and outside of the US or regional carriers who only offer shipping services in limited areas but at better rates. Shipping rates vary and are revised and updated annually along with the change in fuel prices and other prime factors. The cost of insurance also varies with the carrier and the value of the shipped items.
Besides major shipping carriers, there are third-party shipping insurance providers who are often cheaper than the former. However, the primary determinant of the cost of shipping insurance for each carrier is the financial value of the shipped items. Therefore, more expensive products are costlier to insure. Below is a general list of shipping insurance costs from each of the major carriers and postal services such as FedEx, UPS, and USPS.
FedEx Insurance Costs
| Value of Package Items | Insurance Cost |
| Up to $100 | $0 |
| $100.01 – $300.00 | $3 |
| Each added $100 value over $300 | $3 + $1 |
UPS Insurance Costs
UPS has an insurance minimum of $2.70 so the value of the package items must be at least worth $300 to qualify for it.
| Value of Package Items | Insurance Cost |
| Up to $100 | $0 |
| Each added $100 value over $100 | $1.05 |
USPS Insurance Costs
| Value of Package Items | Insurance Cost |
| Up to $50.00 | $1.65 |
| $50.01 – $100.00 | $2.05 |
| $100.01 – $200.00 | $2.45 |
| $200.01 – $300.00 | $4.60 |
| Each added $100 value over $300 for up to $5,000 | $4.60 + $.90 per $100 |
Should you get Shipping Insurance?
If your business has only ever experienced a smooth and uninterrupted shipping experience so far, you may be further inclined towards continuing without insurance. However, consider the volume of your items before you make your final decision. If you’re dealing with less valuable items or have a low volume of orders, the cost of insurance may seem too much. However, if it’s a bulky volume of valuable items, then rest assured the insurance is worth the potential upside that there will be times when it will pay off.
An average person who occasionally mails a letter or some packages doesn’t typically require shipping insurance unless, of course, the package is of significant value. On the contrary, businesses who rely on constant shipments for order fulfillment often need shipping insurance especially if they are dealing with massive order influx and high-value items. Bulky order volumes are more prone to be subject to loss or damaged along the way, and if they are valuable items there is more amount at stake. Therefore, shipping insurance is a must-have for such eCommerce businesses.
Do Third-Party Logistics Companies such as ShipBots cater to Shipping Insurance?
It varies. While some third party logistics (3PL) companies do provide shipping insurance others don’t, and even among those that do offer insurance, some leave the claim handling for the sellers. If you want a 3PL partnership with ShipBots, you can consult an expert on their team and get a fulfillment quote.
