As the market for online shopping continues to grow, ecommerce businesses need to ensure they aren’t losing money on packages that get lost, stolen, or damaged while in transit to a customer. If you are tracking a high percentage of these shipping issues, you should consider the pros and cons of shipping insurance.
Many businesses and individuals purchase shipping insurance, particularly for high-value goods, sensitive or fragile items, to ensure the carrier will take financial responsibility for any damage to their package.
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What is Shipping Insurance?
Shipping insurance is a service that provides coverage for packages in case they are lost, damaged, or stolen during transit. When someone purchases shipping insurance, they are ensuring that the value of the goods being shipped is protected. If anything goes wrong during the delivery process, the carrier or insurance company compensates for the value of the item.
When Should I Get Shipping Insurance for My Packages?
For an ecommerce business, shipping insurance protects sellers and buyers from financial loss if a package is lost, damaged, or stolen during transit. Shipping insurance is particularly beneficial for ecommerce brands who ship high-value items, or ship internationally where mishandling is more likely.
Here are a few risks and rewards of getting shipping insurance.
Minimized financial risk. Ensure compensation for the value or missing or damaged products and protect your revenue from unforeseen shipping problems.
Maximize customer satisfaction. The customer never pays for shipping issues, which enhances trust by ensuring a smoother post-purchase experience.
Higher overall cost. Shipping insurance is an added cost, be sure you are clear how you’ll implement it in your shipping strategy—whether you will offer it to customers at checkout or absorb the cost. If a brand chooses the latter, it’s important to note that this will need to be factored into your overall cost-of-goods (COGs).
More administrative resources. It takes extra time to manage shipping insurance, both in vetting your provider and also filing claims when issues arise. Factor this into your team’s resources before signing on to this additional service.
What Type of Products are Best to Get Shipping Insurance?
As mentioned above, there are a few distinct types of products that are better suited to being insured. Ecommerce brands that should invest in shipping insurance typically include:
- High-value goods: Jewelry, electronics, luxury goods, or artwork, where the cost of loss or damage can be substantial.
- Fragile or delicate items: Products like glassware, ceramics, or fine crafts, which are more prone to damage in transit.
- Custom or unique products: One-of-a-kind items or custom-made products that are difficult or impossible to replace.
- International shippers: Businesses shipping internationally, where risks such as customs delays, theft, or mishandling increase.
- Subscription box services: Monthly product deliveries where frequent shipments raise the likelihood of an issue.
Shipping insurance helps these brands reduce financial risk and protect their customer relationships.
How Much Does Shipping Insurance Cost?
An ecommerce brand can get shipping insurance in a few ways, each will provide a different cost and other considerations.
All of the major national carriers, and many regional carriers, offer shipping insurance.
- USPS: Offers insurance for both domestic and international shipments, covering lost, damaged, or missing items. Priority Mail and Priority Mail Express come with some built-in insurance, with additional coverage available.
- UPS (United Parcel Service): Provides declared value coverage for packages, which acts like insurance. You can insure shipments up to $100 by default, with options to purchase additional coverage based on the package value.
- FedEx: Similar to UPS, FedEx offers declared value coverage, automatically covering up to $100 per shipment, with the option to buy more insurance for higher-value goods.
- DHL Express: Offers insurance for both domestic and international shipments, including a coverage option called “DHL Shipment Value Protection” for high-value items.
There are also third-party providers to choose from. Check with your carrier or logistics provider for commercial rates if you are an ecommerce brand wanting to insure your shipments.
- There are many insurance companies that specialize in shipping insurance, which often provide more flexible and cost-effective coverage options, especially for high-volume or international shipping.
Filing an Insurance Claim
It’s worth noting that signing up for shipping insurance is only half of the equation. Having packages insured can give you peace of mind in case of missing or damaged goods in transit. But there are a series of steps to take when there are issues with packages.
If you have shipping insurance and get customer complaints of a missing or damaged package, you must then file a claim to get reimbursed and rectify the issue.
Each carrier and insurance company will have their own set of rules and protocols around filing an insurance claim. Some may have a specific time frame that the claim needs to be filed by, or filed after the issue is reported. Some will need to first issue a delivery exception report, which can help you track any shipping issuse. Talk to your carrier or insurance provider about the steps to file a claim before signing up for shipping insurance.
Bottom Line
There are two main reasons for an ecommerce brand to insure packages, recoup the cost of missing or damaged packages, and maximize customer satisfaction if packages go missing or get damaged in transit.
If you are shipping goods that are well suited for shipping insurance it can be a great long-term solution for your businesses bottom line and you customers’ satisfaction.
This post was written by Maureen Walsh, Marketing Manager at DCL Logistics. A writer and blogging specialist for over 15 years, she helps create quality resources for ecommerce brands looking to optimize their business.
