How to Make Shipping Insurance More Efficient

by
March 28, 2019

Shipping insurance is a service that reimburses some or all of the delivery fees and the value of a shipment should it becomes damaged or lost in transit. It can be a complimentary service included by default with shipping charges or as an additional charge through the carrier or a third-party insurance provider.

What Types of Shipping Insurance Are Available?


While insurance is always advisable, you don’t always have to purchase it as an additional charge. Many services provide insurance on parcels up to a certain declared value. If the contents of your shipment are within the default coverage, your package is insured at no extra cost.

Carrier Insurance

Carrier insurance is provided by the carrier that ships the package. Costs typically range between $0.75-0.85 for every $100 increment of its declared value over the default insured amount. These amounts are listed below.

Service

Not Included

$50

$100

$200

USPS Priority Mail

USPS Priority Mail Express

USPS Priority Mail international

USPS First Class

USPS Media Mail

USPS Parcel Select

FedEx

UPS

If the declared value of the shipment exceeds these amounts, you should consider purchasing shipping insurance.

Third Party Insurance

A great way to save on shipping insurance is to use a third-party insurance provider. These are companies that do not ship parcels themselves, but instead offer shipping insurance for an item’s declared value.

An advantage of using a third-party shipping insurance provider is that their rates are often competitive in order to attract customers away from using carrier insurance. One such third party shipping insurance provider that ShipStation partners with is Shipsurance.

Self-Insuring

Self-insuring is when you “take matters into your own hands” by insuring the packages yourself. By adding an optional additional charge at checkout, you’re stating that in the event that a package goes missing or is damaged, you will handle the claims process instead of an insurance provider.

Keeping prices low enough that it looks attractive to customers, while not making it so low that you lose money in the event of replacements, can be tricky. So it may be best to offer rates similar to those available through carriers.

Downsides of self-insuring are that it requires a lot of patience, support, and firmness when dealing with claims. It is also more optimized for items that are easily replaceable. If you sell antique lamps, probably forego this suggestion.

How Much Does Shipping Insurance Cost?


For most carriers, the rating structure for shipping insurance is that you pay the additional fees in increments of $100 insured value. Typically, carriers charge between $0.75-0.85 per $100 value, with a minimum cost of roughly $2.50.

So, if you insured a package for $101 and it has a default insured value of $100, the insurance fees that would be applied would be an additional $2.50. Whereas, if you insured the package at $100, you would pay nothing extra for insurance.

Shipsurance, however, charges an average of about $0.20 less per $100, and has no minimum cost. So you can save big by using this third party shipping insurance. It’s worth noting that purchasing and using Shipsurance, as well as filing a claim are all very streamlined through ShipStation.

So, if you insured a package for $101 and it has a default insured value of $100, the insurance fees that would be applied would be an additional $0.70 since they do not require a minimum purchase amount to insure a package.

Another element to consider when deciding on shipping insurance is how much you’re allowed to insure a package for:

Max Coverage

Carrier/Service

Max Carrier Declared Value

Through Shipsurance

Domestic

USPS

$5,000

$10,000 Priority Mail
$1,000 First Class Mail

FedEx

$50,000

$10,000

UPS

$50,000

($70,000 for express services)

$10,000

International

USPS

N/A

First Class Mail Int. $1,000

Priority Mail Int. $5,000

Priority Express int. $10,000

FedEx

$50,000

$10,000

UPS

$50,000

($70,000 for express services)

$10,000

This is important to remember because it is still possible to ship high value items with these services. However if the content’s value is higher than the supported insured value, you would not be compensated for the value that exceeds the allowable coverage.

Is Shipping Insurance Worth It?


It’s important to remember that when you apply shipping insurance to a shipment, the provider will charge you regardless of if what you’re shipping is approved or if it’s going to an ineligible destination. So, if you ship a cellphone to Syria, and it gets lost on the way, not only would your claim not be accepted, you’d be out the money you paid for insurance. Because of this, you need to be aware of certain restrictions when shipping.

Max values of certain items

Some items have values that are subjective, such as antiques. If you ship antiques there may be max values available for insuring. For instance, FedEx only allows you to insure antiques up to $1,000.

Also, if you sell unique items or high-dollar electronics you’ll want to verify that any insurer you use will cover the full value of your items without having to upgrade to more premium services. An example is you have to use signature services and/or Priority Express International services when shipping laptops internationally with USPS.

International Restrictions

Shipping internationally takes planning. When shipping to foreign countries, you need to make sure that you’re not shipping prohibited materials or items. Sometimes, the prohibited items can be surprising. For instance, Italy has sensible restrictions: They don’t allow you to import leeches. However, some are more confounding: Exposed film or shoes. If your items don’t clear customs when shipping prohibited materials, your shipping insurance is void.

Furthermore, there are countries that certain insurers do not allow coverage to: Afghanistan, Angola, Bolivia, Burma, Congo, Cuba, Iran, Iraq, Ivory Coast (Cote d’Ivoire), Liberia, Nigeria, North Korea, Paraguay, Sierra Leone, Somalia, Sudan, Syria, Venezuela. Shipping to these countries violates trade sanctions with the US.

Certain countries allow coverage, but as soon as the airplane or ship touches down into these countries, coverage ceases. This includes but is not limited to: Russia and other Commonwealth of Independent States (including Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Russian Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan)

How do I file a claim?

Filing a claim with a carrier can be a long process. There are several pieces of information that can help expedite the process. It is possible for a recipient to file claims, but it is much more effective for the account holder with a carrier to file the claim.

When you file a claim with the carrier, it’s advisable to do this as early as possible. And have as much information ready as possible to make the process go as smoothly as it can.

Damaged Items

If a shipment arrived damaged, verify that the shipping insurance provider wants the recipient to keep the package before awaiting next steps. Again, do not request the package to be returned to you or a repair technician, etc. until the insurance provider authorizes you and the customer to. Coordinate with the recipient as needed to provide photos of the damage to the packaging and contents within. Contrast this with photos of the packaging and contents in their normal condition. A written statement from the recipient detailing the “unboxing” process, etc. and information about the damage is also great supplementary information to have. This information helps expedite the claims process.

As the seller, it’s important you supply the carrier with documentation that supports the actual repair and/or replacement cost of the damaged merchandise. This documentation, which may be provided either when the damage is first reported or after a notification is issued, can usually be uploaded online. Supplementary documentation that can help expedite or reinforce your claims of damage are documents such as original invoices, purchase orders, or other information requested by the carrier.

Lost In Transit

When you and/or your customer is tracking a package and notice it’s no longer moving and never arrives, you’ll want to submit a missing mail request. Information needed for this is generally includes:

  • Sender mailing address
  • Recipient mailing address
  • Size and type of packaging used
  • Identifying information such as Tracking number(s), the mailing date from the mailing receipt
  • Description of the contents such as what it is and the brand, model, color, or size, if applicable
  • Pictures that assist the carrier in locating and identifying the package

If the package is found, next steps will be issued via email.

Stolen Package

Let’s clear the air, if a package was stolen after being marked as delivered, it’s rare that reimbursement will be issued. Most of what can be done here is to take preventative measures between you, your customers, and the carrier. Also, the steps for filing a claim will more or less match the steps for a package lost in transit. The only additional documentation that would be required would be information detailing the delivery notifications from the carrier and anything sent from you as a seller.

If the package is being sent to a residential address, recommend adding signature confirmation as a way to avoid the risk. For the sake of a recommendation through a personal anecdote, I, as a ShipStation employee, always have my deliveries sent to our office. Occupants not being home during delivery, thus causing additional delivery attempts or stolen parcels is one of the major reasons FedEx and UPS charge more when delivering to residential addresses.

Different carriers have different restrictions and guidelines when filing a claim. Below are what each of the major US carriers requires when filing a claim.

Filing a Claim

Filing a claim with the shipping insurance provider is where “your journey starts!” Below are links and timeframes for when you can file a claim.

UPS

UPS requires you to file your claim within 9 months of when postage was created. UPS also requires you to wait 24 hours from the expected delivery date to file a claim.

FedEx

FedEx requires you to file your claim for damaged shipments within 60 days of postage being created. If a shipment is missing, though, you have up to 9 months to file the claim.

USPS

Regardless of if you ship with a USPS provider such as Stamps.com or Endicia, you still need to file the claim with USPS directly. For USPS shipments, try to file within 60 days of when postage was purchased.

Shipsurance

Shipsurance requires you to file a claim and provide all required documents within 120 calendar days of when the shipment was made.

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