Though major shipping carriers are generally reliable, packages still get lost and damaged, and ecommerce businesses need to be prepared when they do.
A recent survey showed that when ecommerce shipments are damaged or delayed, 53.1% of shoppers expect expedited shipping on replacement products and 43.9% expect refunded or discounted shipping costs.
This means that many ecommerce businesses will have to cover the cost of damaged or undelivered packages, and then some. Instead of covering losses out of pocket, you can get your packages insured. Read on about the costs and overall value of shipping insurance.
What is shipping insurance?
Shipping insurance is a service that protects shippers against lost, stolen, or damaged packages. If an insured package does not reach its destination, or if it is damaged when it’s delivered, then the shipper is reimbursed the declared value of the items in the package.
How much does shipping insurance cost?
For all carriers, the cost of shipping insurance depends on the value of the shipped items. The more valuable the items, the more expensive the package is to insure. See how much shipping insurance costs for UPS, Fedex, and USPS here:
USPS Insurance Costs:
|Value of contents||USPS Insurance cost|
|Up to $50.00||$1.65|
|$50.01 to $100.00||$2.05|
|$100.01 to $200.00||$2.45|
|$200.01 to $300.00||$4.60|
|Every additional $100 value over $300 (for a value up to $5,000)||$4.60 + $.90 per $100 increase|
FedEx Insurance Costs:
|Value of contents||FedEx Insurance cost|
|Up to $100||$0|
|$100.01 – $300.00||$3|
|Every additional $100 value over $300||$1|
UPS Insurance Costs:
|Value of contents||UPS Insurance cost|
|Up to $100||$0|
|Every additional $100 value over $100||$1.05|
UPS has a $2.70 insurance minimum, so the value of the shipped product must be at least $300 to qualify for UPS shipping insurance.
Is shipping insurance worth it?
Whether or not shipping insurance is worth the cost depends on your shipping volume and the value of your items. The chance of an average letter or package getting lost or damaged is relatively small. But if you are shipping a high volume of valuable items, then shipping insurance will likely pay for itself.
1. The casual shipper
The average person sending a letter or package generally doesn’t need shipping insurance unless the items are particularly valuable.
2. The business shipper
Business shippers, on the other hand, are constantly shipping items of value. Higher-order volume means that some of your packages will eventually get lost or damaged. And the more valuable your products are, the more you stand to lose. For ecommerce businesses shipping very expensive items, shipping insurance may be a no-brainer.
When in doubt, get shipping insurance
For both casual and business shippers, the rule is the same: If you think you might need shipping insurance, get it. It only costs a few bucks, and if your package is valuable enough that you’re considering insurance, then the small investment is worth the potential upside if something goes wrong.
A recent survey found that 70% of customers are unlikely to shop from an online store after a poor delivery experience. Lost and damaged shipments are unavoidable, but you can still win customers back by quickly reimbursing or replacing the items. Shipping insurance allows you to do so without taking a loss.
Shipping Insurance FAQs
Orders lost and damaged in transit with the carrier can have a major impact on your business. Check out some of the most frequently asked questions about shipping insurance.
How much does it cost to ship with insurance?
It depends on the carrier and the value of the shipped items. The costs of shipping insurance from each of the major carriers and postal services are listed above. There are third-party shipping insurers as well that tend to be even cheaper than the major carriers.
How does shipping insurance work?
To get reimbursed when a package is reported missing or damaged, file a claim with your carrier or insurer. You will need to submit documentation proving the value of the items.
The carrier may have to search for a product if it was lost or stolen, which can take up to 10 days. Otherwise, claims processing typically only takes a few days.
How much is UPS insurance per $100?
Parcel insurance with UPS costs $1.05 for each $100 of value that you are shipping.
Do 3PLs handle shipping insurance?
Some third-party logistics (3PL) providers do while others don’t. And some 3PLs will provide insurance but require the seller to handle claims processing on their own. Here at ShipBob, in every verified case of loss or damage, we can file claims with the carriers on the customer’s behalf and claim up to $100 in retail merchandise value.
For orders valued over $100, ShipBob highly recommends adding additional insurance to make sure they can claim the full amount if something goes wrong in transit. You can also purchase extras such as a certificate of mailing for extra peace of mind.
Need help with fulfillment? See if ShipBob is a good fit for your business. Speak to a fulfillment expert and request a pricing quote from ShipBob.
Thinking about outsourcing ecommerce fulfillment and shipping to a 3PL? Learn how to find a fulfillment company you can trust to help your ecommerce business grow, know the right questions to ask a potential 3PL, and understand how to offer faster, more affordable shipping to ecommerce customers. Download “How to Choose a 3PL for Your Ecommerce Business.”