Shipping packages through major carriers like UPS, USPS, and FedEx is generally reliable. However, there are still instances where packages get lost or damaged during transit. To ensure e-commerce businesses are prepared for such situations, it is essential to understand the value of shipping insurance. Not only does it provide protection against lost, stolen, or damaged packages, but it also helps businesses maintain customer satisfaction by offering prompt replacements or refunds.
What is Shipping Insurance?
Shipping insurance is a service that safeguards shippers against any unfortunate incidents that may occur during the shipping process. If an insured package fails to reach its destination or gets damaged upon delivery, the sender is reimbursed for the declared value of the items contained within the package.
Reading: Who pays for shipping insurance
The Cost of Shipping Insurance
The cost of shipping insurance varies across carriers and is primarily dependent on the value of the items being shipped. Generally, the more valuable the items, the higher the cost of insuring the package. Below are some examples of insurance costs for different carriers:
USPS Insurance Costs:
FedEx Insurance Costs:
UPS Insurance Costs:
It’s important to note that UPS requires a minimum insurance value of $2.70. Hence, only packages with a value of at least $300 are eligible for UPS shipping insurance.
Is Shipping Insurance Worth It?
Determining whether shipping insurance is worth the cost depends on the volume and value of your shipments. While the chances of an average letter or package being lost or damaged are relatively low, for businesses shipping a high volume of valuable items, shipping insurance can prove to be a wise investment. Let’s explore two different scenarios:
1. The Casual Charger
For the average person shipping letters or packages that do not contain particularly valuable items, shipping insurance is often unnecessary.
2. The Commercial Carrier
Business shippers consistently deal with items of value, and with higher order volumes, the chances of lost or damaged packages increase. Moreover, the more valuable the products, the greater the potential loss. In this case, it becomes a no-brainer for e-commerce companies shipping expensive items to invest in shipping insurance.
Ultimately, the rule of thumb is that if there’s any doubt or concern about the need for shipping insurance, it’s always better to err on the side of caution and opt for it. The small investment it requires is well worth the peace of mind knowing that you’re covered in case anything goes wrong.
A recent survey revealed that 70% of customers are less likely to purchase from an online store after a negative delivery experience. While lost or damaged shipments are inevitable, prompt refunds or replacements can help regain the trust of customers. By having shipping insurance in place, businesses can confidently offer such solutions without facing significant financial losses.
Frequently Asked Questions About Shipping Insurance
Losing or damaging orders during transit can have a significant impact on your business. Here are some commonly asked questions regarding shipping insurance:
How much does it cost to ship with insurance?
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The cost depends on the carrier and the value of the items being shipped. You can find specific shipping insurance costs for major carriers and postal services mentioned above. Additionally, there are third-party shipping insurers that often offer even more affordable rates than the major carriers.
How does shipping insurance work?
To receive a refund for a reported lost or damaged package, you need to file a claim with your carrier or insurer. You’ll be required to provide supporting documentation that proves the value of the items in question. While carriers may take up to 10 days to search for a lost or stolen product, claims processing typically takes only a few days.
How much does UPS insurance cost per $100?
UPS charges $1.05 for every $100 of value being shipped for parcel insurance.
Do third-party logistics providers handle shipping insurance?
Some third-party logistics providers (3PL) offer shipping insurance, while others do not. In some cases, the 3PL may provide insurance but require the seller to handle claims processing independently. At ShipBob, we file claims with carriers on behalf of the customer for any verified losses or damages, allowing them to claim up to $100 in retail merchandise value. For orders valued over $100, we recommend adding additional insurance for complete coverage during transit.
If you require assistance with compliance and want to explore if ShipBob is the right fit for your business, our fulfillment expert can provide guidance and offer a price quote.
If you are considering outsourcing your e-commerce fulfillment and shipping to a 3PL, we have resources to help you make an informed decision. Learn how to find a trustworthy fulfillment company that can help grow your e-commerce business. Discover the essential questions to ask potential 3PL partners and understand how to offer faster and more affordable shipping to your customers. Download our guide on “How to Choose a 3PL for Your E-commerce Business” to get started.