To add shipping insurance or not to add shipping insurance? That is the question e-commerce businesses have to ask themselves almost every time they ship out an order.
While it may seem like another added expense, there are a few eye-opening stats that every business owner should consider:
With the shipping process being so vital to customer retention, and damage + lost packages being so prevalent in the world of e-commerce today, the best safeguard for your shipments is often through shipping insurance.
While you’re trying to decide whether shipping insurance is really worth it, let us help answer some of your questions, such as what it is, what it does, how much it costs, what your options are, and a look at the cost-benefit analysis for your particular business.
What Is Shipping Insurance?
Shipping insurance is an added service to your shipment that protects it against damages during transit or if it gets lost in transit. By adding shipping insurance to your package you can be reimbursed the declared value of the products within the package in the event they arrive at the customer damaged, delivered but stolen, or never arrive to the customer at all.
Shipping insurance works similar to getting insurance of other types. You’ll pay a small fee initially but will be able to have peace of mind in the event that anything goes wrong with your product.
How Much Does Shipping Insurance Cost?
The cost of shipping insurance will depend on either the carrier you’re using to send your package, the software you use to generate a label, or the third-party insurance company you’re using to insure your package.
There is also the option to pass this fee onto the customer so you don’t pay anything at all. However, that cost is a less positive experience for your potential customer and can deter them from purchasing on your site.
Cost of USPS Shipping Insurance
| Declared Value of Product | Fee |
| $0.01-50.00 | $2.45 |
| $50.01-100.00 | $3.15 |
| $100.01-200.00 | $3.85 |
| $200.01-300.00 | $5.05 |
| $300.01-400.00 | $6.40 |
| $400.01-500.00 | $7.65 |
| $500.01-600.00 | $10.35 |
| $600.01-5,000.00 | $10.35 + $1.55 per 100 dollars over $600 in declared value. |
If you’re sending your packages with the US Postal Service, the price for USPS insurance will be affected by the declared value of the shipment. Fees start at $2.45 and increase as the declared value of your package goes up.
Cost of UPS Shipping Insurance
| Declared Value of Product | Fee |
| $0.00-$100 | $0 |
| $100.01-300.00 | $3.45 |
| $300.01-$50,000.00 | $1.15 per $100 declared |
The maximum declared value will depend on your shipping method. If you’re shipping from a UPS Store the maximum is $50,000, but if you’re shipping via a third-party retailer the limit is $1,000. If you’re shipping from UPS Drop Box the limit is $500. More information can be found here.
Cost of FedEx Shipping Insurance
| Declared Value of Product | Fee |
| $0.01- $100 | $0 |
| $100.01-$300.00 | $3 |
| $300-$100,000 | $1 extra per $100 additional declared value |
The $100,000 maximum declared value limit for FedEx shipping insurance is available to those who sign up for the high-value jewelry shipping program and only applicable to domestic shipments. International shipments have a limit of $25,000.
Cost of Third-Party Shipping Insurance
Using a third-party shipping insurance can be a great way to lessen the cost of protecting your products during the delivery process. As an example, we’ll look at using Xcover via Shippo. Let’s say you’re shipping an electronic device worth $150 within the U.S., and you’re looking to insure your product before shipping it.
| Sample Declared Value | UPS Insurance Cost | FedEx Insurance Cost | USPS Insurance Cost | Xcover via Shippo |
| $150 | $3.45 | $3 | $3.85 | $1.88 |
You can see that by choosing Xcover shipping insurance via Shippo, you can save you up to 68.75% on your shipping insurance cost.
When Is Shipping Insurance Worth It?
Determining whether or not shipping insurance is worth it will largely depend on the items you’re selling and the distance they are traveling. Let’s look at two examples:
For the first example, let’s say you sell low-cost t-shirts on your site with the maximum retail price of a shirt being $25. If you’re shipping with UPS or FedEx, you’ll already be covered for the cost of shipping a t-shirt because it falls under the $100 declared value.
If you’re choosing to ship with USPS you may want to consider insurance. Given the fact that nearly one in 10 shipments are lost, stolen, or damaged, the cost of insurance may be less than the potential loss of a shirt.
Another example: if you’re shipping bigger ticket items like electronics, furniture, or jewelry with a minimum price of $100 or more, adding insurance is an excellent tactical choice. For oversized items like bedding and furniture alone, 21% arrive at the customer damaged.
Let’s say you sell 10 products at $150 each and add shipping insurance to every shipment – if you’re using Xcover via Shippo, your total cost of insurance for those 10 packages would total up to just $18.80. If you went through without insuring your items and something unfortunate happened during the shipping process, your business would be at a loss of $150. In this instance, spending a little extra to insure your products would outweigh the risk of trying to cover the total price of one item should anything happen to it.
Another thing to consider is the distance at which packages travel. Oftentimes the further the package has to travel, the increased likelihood the package switches hands, and the higher chance that it could get lost or damaged on its way to the customer. This is the case for many domestic and international shipments.
If you’re shipping to customers solely within your region, this may not be as much of an influence for adding insurance, but for e-commerce businesses who sell across the country or worldwide, it is highly worthwhile to consider shipping insurance.
Shipping with A Third-Party Insurer
Shippo partners with Xcover to offer shipping insurance at just 1.25% of the package's value for domestic shipments and just 1.50% for international shipments with no minimum fees. This means even low-value items can be protected for just a tiny fee.
Xcover is a shipping insurance company offering coverage for shipments sent via the major shipping carriers worldwide.
One of the main differences between using a company like them versus relying solely on the major carriers is that Xcover is often able to process claims faster and smoother. In fact, 95% of claims through Xcover are resolved in as little as 3 days or less. This means that your business is able to process new shipments or issue refunds to customers as soon as possible, without having to wait for payment on the original shipment.
What Does Shipping Insurance Do?
By adding shipping insurance through Shippo, your orders are guaranteed:
Easy Claims Process
With a paperless claims process, take your time to capture all your documentation for a smooth filing experience completely online.
Fast Reimbursem*nts
Get your claims back quickly through a physical check or via PayPal. Get your money back to keep your business liquid.
Affordable Premiums
Keep insurance affordable and costs down for your business and your customer. You’ll only pay 1.25% of the insured shipment value for domestic orders and 1.50% for international orders.
How To Insure Your Packages with Shippo
Whether your orders are valued at $15 or $1500, keep your customers feeling secure and satisfied by adding shipping insurance. Protecting your packages through this simple step will guarantee you get your money back in a quicker, hassle-free fashion than the complicated steps generally required by major carriers.
Don’t just stop at the monetary protection – make sure you’re protecting your products physically, too! Choosing the right infill to put inside your packages can help in this regard.
Additionally, for any orders that have the same items and value, you can easily add insurance to multiple orders, saving you time and a few extra clicks. You can also select to automatically apply insurance to all packages with one single click as well.
Though shipping insurance offers coverage for most items and products, please keep in mind the few exclusions, such as currency, neon items, hazardous material, monitors, screens, television, mobile telephones, perishable cargo or similar property, automobiles, motorcycles, live animals, flowers, plants, cigarettes/cigars, tobacco, plated glass, stained glass, and float glass. See Xcover Terms of Service for the full list.
As an expert in e-commerce logistics and shipping practices, I can attest to the critical importance of making informed decisions about shipping insurance. The success of e-commerce businesses is closely tied to customer satisfaction, and the shipping process plays a pivotal role in achieving this. Let's delve into the key concepts discussed in the article.
Shipping Insurance: A Necessity for E-Commerce
1. What Is Shipping Insurance? Shipping insurance is a supplemental service that protects shipments from damages or loss during transit. It ensures that businesses can be reimbursed for the declared value of products if they arrive damaged, are stolen upon delivery, or never reach the customer.
2. How Much Does Shipping Insurance Cost? The cost of shipping insurance varies depending on the carrier, software used for label generation, or third-party insurance provider. Carriers like USPS, UPS, and FedEx have different fee structures based on the declared value of the products being shipped. Third-party insurance providers, such as Xcover via Shippo, can offer substantial cost savings.
3. Cost-Benefit Analysis: Carrier-Specific Rates
- USPS: Costs range from $2.45 to $10.35, with an additional fee for values over $600.
- UPS: Charges vary from $0 to $1.15 per $100 declared, with different maximum declared values based on shipping methods.
- FedEx: Costs range from $0 to $1 per $100 additional declared value, with a maximum limit of $100,000 for domestic shipments.
4. Third-Party Shipping Insurance Utilizing third-party insurance, such as Xcover via Shippo, can significantly reduce costs. In the example provided, choosing Xcover resulted in a 68.75% cost savings compared to traditional carrier insurance.
When Is Shipping Insurance Worth It?
1. Type of Products:
- Low-Cost Items: For items like low-cost t-shirts, carrier coverage may be sufficient. However, considering the prevalence of lost, stolen, or damaged shipments, particularly with USPS, additional insurance may be worthwhile.
- High-Value Items: Electronics, furniture, or jewelry with a minimum price of $100 or more are prime candidates for shipping insurance. The potential cost of not insuring such items outweighs the expense of coverage.
2. Distance and Shipping Risk:
- Local vs. International: The distance packages travel affects the likelihood of damage or loss. For businesses operating globally, shipping insurance becomes highly worthwhile.
Shipping with a Third-Party Insurer: Xcover via Shippo
1. Cost-Effective Options:
- Domestic: 1.25% of the package's value.
- International: 1.50% with no minimum fees.
2. Fast Claims Processing:
- 95% of claims through Xcover are resolved in 3 days or less, ensuring swift resolution and minimal disruption to business operations.
What Does Shipping Insurance Do?
1. Guaranteeing Order Security:
- Easy Claims Process: Streamlined, paperless claims process for a hassle-free experience.
- Fast Reimbursem*nts: Quick reimbursem*nt via check or PayPal to maintain business liquidity.
- Affordable Premiums: Cost-effective insurance options at 1.25% for domestic and 1.50% for international orders.
How To Insure Your Packages with Shippo
1. Ensuring Customer Satisfaction:
- Security for All Orders: Regardless of order value, shipping insurance ensures customer satisfaction and business security.
- Efficiency in Bulk Operations: Easily add insurance to multiple orders with a few clicks, streamlining the process and saving time.
In conclusion, shipping insurance is a strategic investment for e-commerce businesses. By understanding the cost structures, benefits, and leveraging third-party options like Xcover via Shippo, businesses can protect their products, ensure customer satisfaction, and maintain a competitive edge in the dynamic world of e-commerce logistics.
