Is Shipping Insurance Necessary When Sending a Package?

To insure or not to insure—that is the question, but isn’t shipping insurance something most businesses assume they need? The answer likely depends on what types of items the business ships.

Whether you’re a sole proprietor running an e-commerce business or you have a small manufacturing facility, you can make sending a package more secure by purchasing insurance.

We’ve put together a quick guide on why you should insure the items you ship. Take five and read today’s post before you process your next shipment.

Why Should I Worry Insuring My Packages?

Have you ever taken a call from a customer inquiring about a package you shipped out weeks ago? It’s a frustrating call for the customer and the shipper (you)!

Your customer experiences an immediate deflation of their excitement to receive their goods. Your business loses money.

In the United States, a shocking 1.7 million-plus packages disappear every day! In larger cities, 15 percent of shipments never reach the customer. What percentage of that pie are you willing to eat?

Beyond the monetary loss, when shipments don’t arrive at their final destination, it can mar the relationship you have with your customer. Some customers won’t do repeat business with a brand they view as unreliable.

Proactively including shipping insurance, protects your customer and you from the aggravation of lost, stolen, or damaged packages.

The Carrier Is Not Automatically Responsible

Before you pay for insurance, you’ll want to understand how the coverage works. While many carriers provide automatic insurance up to $100, each company sets its own rules about how free insurance works.

For example, the USPS only covers insurance if you’re using their Priority Mail Express service. UPS also includes insurance coverage for packages valued at $100 or less. FedEx shipping insurance works much the same, with the carrier accepting a maximum liability of $100 on packages with an undeclared value.

If your shipment is lost or damaged, generally, the carrier covers the contents’ declared value. What about stolen packages?

With package insurance, you can file a claim for a stolen shipment. Without insurance, you’re out of luck and will need to replace the stolen item at your expense, including the cost to reship.

Do I Always Need Shipping Insurance?

Insuring your packages makes sense most of the time. You’ll need to think about the impact lost shipments could have on your bottom line.

If you only ship small items with a value of $100 or less and your chosen carrier automatically includes insurance, then it’s not cost-effective for you to buy additional coverage. Maybe you sell one-of-a-kind creations, which you can’t easily replace or substitute with another item. In that case, insurance isn’t a question—you must have it!

Another type of package should always have insurance. Anytime you ship an item internationally, you place your item at risk. International shipments go through various parties, and there’s a high incidence of loss or damage.

How to Weigh Your Risk

When deciding whether it’s worth it to purchase shipping insurance, you should look beyond the value of the item(s). Consider the type of product you’re shipping and the destination.

Certain items are attractive to thieves, making them more likely to be stolen. A piece of jewelry, for example, is an enticing item to steal because of its small, easy-to-grab package. Unless you can afford to replace the item, it’s wise to budget for insurance.

Think about the destination. Shipping to some areas seems to increase the risk of lost, damaged, or stolen packages. Know your carriers—some have a higher rate of delivering damaged shipments.

You can take steps to reduce your risk for both loss and damages. In addition to ensuring you have insurance coverage, you can also use custom printed tape on your packages.

A box labeled with your business name stands out in the crowd of missing packages. You can also have a label created designating the package as fragile, reminding the delivery person to handle with care.

When Does Insurance Not Make Sense?

Before you pay for shipping insurance, read the fine print. Not all items qualify for insurance.

Every carrier uses a form containing their unique terms and conditions. Don’t let the fine print overwhelm you—take time to read it and ask questions about things you don’t understand.

Pay close attention to the items designated as ship-at-your-own-risk.

If you pay for insurance on an item the carrier lists as insurable, you not only won’t get anything if you need to make a claim, you lose the cost of the insurance and the shipping.

Depending on the carrier, you may not be able to insure:

  • Gemstones
  • Artwork
  • Currency
  • Hazardous Materials

Are you wondering why someone would pay for insurance on items they know aren’t covered? We’re not calling anyone out, but some people just don’t pay attention, including the person helping you at the shipping desk. Some people leave the contents of their packages a mystery too!

Shipping Insurance Comes with a Caveat

If you’re not convinced about reading the fine print on your carrier’s Terms and Conditions page, here’s something that should give you cause for reconsideration. All contracts with shipping carriers have liability clauses.

Read the one where your carrier talks about situations where they’re not liable, such as natural disasters.

Most carriers will not accept liability for packages damaged or destroyed because of earthquakes, hurricanes, and floods, a.k.a. acts of God. Any situation a shipping carrier deems as beyond their control doesn’t qualify for reimbursement, even if you buy shipping insurance.

Feeling Confident and Ready to Compete in Shipping Wars?

If only reality shows weren’t so short-lived! With our guide in hand, you could offer some stiff competition—and discuss the value of shipping insurance. Do you suppose the owner of the 4000 lb, 22-foot long steel horse fussed about buying insurance?

After reading this article, you likely feel ready to tackle anything related to shipping your good safely. We invite you to browse the blog for more engaging content before you go back to boxing and taping!