What “Free” Insurance Really Costs

by
May 13, 2014

 

Ariel Shmorak is Vice President of Shipsurance Insurance Services and has been covering small business shippers for over a decade.

Last June, the United States Postal Service updated their domestic Priority Mail service to include free insurance coverage with every package in $50 and $100 increments. This was done to make their service more in line with their direct competitors, FedEx and UPS, who have offered $100 of free liability coverage on their shipment for many years. This seems like a great option for online sellers because they can now ship with Priority Mail and save on insurance. Even with the discounted shipping insurance coverage offered by Shipsurance, which is integrated with ShipStation, you can’t compete with free coverage! Or can you?

Let’s dive into this so-called “free” coverage. At first glance, saving $0.79 (the current Shipsurance rate through ShipStation) for a sub-$100 package is a no-brainer. However, what about if something happens to the shipment? What if it gets lost in transit? Damaged? What’s the true cost of saving that $0.79?

Here’s a list of issues we gathered from sellers that have filed a claim for the “free” coverage with USPS:

  • Claims scanned as “Delivered” are automatically denied because they have a delivery scan.
  • The recipient has to take the item to a local post office if it is damaged and they are not willing to participate.
  • Reaching a human being on the telephone can be rather difficult when you want to discuss a claim. All systems are automated and callbacks are hard to come by.
  • Claims that are paid may take up to six months for a payment to be made. (Remember, we are talking about claims valued at $100 and less that are taking this long.)

As you can see, while this “free” coverage didn’t cost you anything monetarily, it becomes rather expensive when your precious time is spent following up with it. When the claim is denied, it now becomes an expense. Time is money, after all.

Taking advantage of the Shipsurance coverage built into ShipStation is a cost effective way to manage your shipping risk and avoid some of the pitfalls mentioned above. As a ShipStation user, you have access to this discounted coverage without needing to sign up with Shipsurance; Coverage is available within ShipStation from the get go.