Top 3 Tips for Insuring Ecommerce Shipments

As an ecommerce seller, it’s up to you to deliver the goods. That means getting sold items to their respective buyers promptly and in good order.

On the other hand, unless you’re hand-carrying each package to its destination (which we can safely assume you aren’t), you’re actually entrusting your items to a shipping carrier that you hope will do the job of delivering them in a timely manner and in the same condition they were in when you packed them. 

Unfortunately, that doesn’t always happen, which is where insurance comes into play. Here are 3 things you need to do in order to insure your ecommerce shipments both thoroughly and cost effectively.

1. Assess the risk.

First, do a quick risk assessment. Judging whether insurance is really needed is a whole ‘nother topic in its own right, but basically you should consider what the item is and where it’s going. If it’s fragile and/or expensive and/or highly susceptible to theft and/or headed for a potentially sketchy destination, then yes, you should insure it.

2. Understand the coverage.

Getting insurance through your carrier may seem easiest, but it can cost you in more ways than just the price of their coverage, even when that coverage is offered free of charge. USPS includes $100 worth per package (note: not per item in that package!) in the price of their Priority Mail postage, while UPS and FedEx give you that amount of coverage free with every package.

You can also purchase additional coverage, if desired, as long as you declare the value of each shipped item.

However, the major carriers’ coverage is for declared value only. The amount of their coverage equals their maximum liability should that package be lost or damaged in transit. Furthermore, with this type of coverage, the shipper must prove that the damage or loss is directly due to the carrier’s negligence. This can be hard to prove — and result in denial of a claim.

For true insurance, it pays to look to a third-party insurer, who will usually provide fuller coverage at a lower cost. In addition, they provide cargo insurance, which pays out regardless of carrier negligence.

In addition, be sure to check the insurer’s list of exclusions (both items and destinations) as well as their requirements for packaging and filing a claim.

3. Consider the cost.

This is basically a no-brainer. Let’s use ShipSaver’s rates as an example. For domestic USPS packages, it will cost you $1 for each $100 worth of coverage; by contrast, insuring packages through eBay costs $1.65 for up to $100, while at the post office you’ll be charged $2.10 for $0.01-$50 and $2.70 for $50.01-$100.

Additionally, only third-party providers like ShipSaver will insure packages shipped via USPS First Class International.

For packages shipped domestically via FedEx or UPS, ShipSaver’s price is $0.75 per $100 of coverage from $100.01 upward, whereas once you exceed their first $100 of free insurance, you’ll pay $2.70 for $100.01-$400 in coverage at FedEx or UPS. 

Check out ShipSaver’s latest rate comparisons for insuring domestic and international packages. Then select the shipment insurance that’s right for you and your ecommerce business.

How to Get Your Shipment Insurance Claim Approved

There’s basically only one way to ensure that your insurance claim for a damaged or lost package is approved: Read through the insurer’s terms of service, including their instructions for filing a claim; then follow them to the letter. 

And be sure to dot your I’s and cross your T’s, because the most common reason for denying a claim is that it doesn’t meet the company’s standards for approval. Insurance companies deal with claims all the time, and they have a process in place. That means that you’ll have to jump through some hoops enroute to getting your claim approved. Not doing so is a sure route to having that claim denied.

The First Line of Defense

The road to a successful insurance claim starts before an item ever leaves your hands. No matter what kind of coverage you buy, chances are the insurer requires items to be packaged appropriately for safe transit. So don’t skimp on bubblewrap, packing peanuts, or sturdy boxes! If you don’t pack an item reasonably well, you’ll void your coverage.

Furthermore, if photos aren’t already part of a listing that you can simply print out, consider documenting your item’s “Before” condition in case there turns out to be an “After”. You might also want to take photos of your packing job as well as the resulting package. 

In addition, hang onto any documentation pertaining to an item’s value and other details about the item. Serial numbers in particular are crucial when filing a claim for certain categories of goods. 

Declared Value vs Cargo Insurance

One key factor in filing a claim is what type of coverage you have. Did you get it through the carrier? USPS Priority Mail packages and all FedEx and UPS packages automatically come with $100 worth of coverage.

However, the carriers offer what’s known as declared value coverage. The amount of their coverage represents their maximum liability in the event a package is damaged or lost. So if your item is worth more than $100, you must declare its value and purchase additional coverage.

Furthermore, with declared value coverage, you have to prove that the damage or loss was directly due to the carrier’s negligence, or your claim may be denied. 

By contrast, third-party insurance providers offer cargo insurance, which pays out without regard to the carrier’s negligence. It’s also usually cheaper and more thorough than the coverage sold by USPS, FedEx, or UPS.

Submitting Your Claim

Most insurers require 4 things:

  1. A tracking number
  2. Evidence of insurance
  3. Evidence of value
  4. Proof of damage or loss

If you’re filing with USPS, be sure to have the recipient save the original packaging along with the damaged goods, because USPS may ask for them to be presented for inspection. By the same token, some third-party insurers (including ShipSaver) require damaged goods and their packaging to be retained until the claim is completed.

File your claim promptly! USPS allows 60 days for most mail classes. So does FedEx, while UPS allows up to 9 months. ShipSaver allows 120 days for domestic USPS packages and 60 days for packages shipped via FedEx or UPS. The sooner you file your claim, the sooner it can be resolved. 

Here’s where to find out exactly what you need to file a claim with USPSFedExUPS, or ShipSaver.

Six Myths About Shipping and Insurance

When it comes to insuring ecommerce shipments, even the savviest of online sellers may not know it all. Don’t be misled by these common myths about shipping and insurance.

Myth #1: Insurance is for the buyer’s protection.

A lot of sellers are confused about this. Don’t be one of them! Insurance is for the seller’s protection, not for the buyer’s benefit. 

On eBay, you can’t even charge the buyer for insurance as a separate line item. That’s because the buyer is covered by eBay’s Money-Back Guarantee: “Get the item you ordered or your money back.” 

Should an item arrive damaged and the seller be unwilling to issue a refund, online buyers can file a PayPal or credit card chargeback. eBay buyers can open a SNAD case, too, since the item is not as described.

It’s true that you may need the buyer’s help in order to file a claim — especially in the case of insurance purchases directly from the carrier, who may require the broken item and its packaging to be presented for inspection. You also may want to hold off refunding your buyer until they’ve helped you file the claim, so they’re motivated to assist you. 

But it’s not OK to withhold a buyer’s refund while you wait to be reimbursed by insurance.

Myth #2: Insurance must be purchased from the carrier.

This may be the most perfidious myth of all! Not only is there no mandate to buy insurance through your shipping carrier, numerous third-party insurers (including ShipSaver) offer better coverage for less than what the carriers charge. 

Furthermore, third-party companies such as ShipSaver are usually much easier to work with when it comes to filing a claim. So it literally pays to shop around before you buy!

Myth #3: Laptops, LCDs, TVs, mobile phones, and tablets can’t be insured.

Oh yes, they can! These items are extremely fragile and loss prone, and they often are not properly packed. For these reasons, USPS and some other carriers exclude them. However, ShipSaver will provide full coverage as long as an adult signature is required at the time of delivery.

Myth #4: There’s no way to insure USPS First Class International packages.

USPS won’t insure its own First Class International packages, but third-party insurers like ShipSaver are happy to cover most items shipping via USPS FCI. There are some exclusions, of course, but no more so than for other mail classes.

Myth #5: Insuring packages is a time-consuming and cumbersome process.

This is only true if you actually go to the post office to purchase shipping labels and insurance, which hasn’t been necessary in this century. Nowadays, insurance on any or all of your items is just a click or two away at shipping time. 

In fact, with ShipSaver, you can bulk-insure all your items at once; filter to insure only selected items; or even set up auto-insure, which automatically insures all shipped items meeting criteria you set — e.g., items valued at $X or more. All of these options are available whether or not you also purchase shipping labels through ShipSaver.

Myth #6: Packages must be insured at the time of shipment.

Not necessarily! With ShipSaver, you can add coverage up to one full calendar day after you’ve shipped your item. By the same token, you can also cancel insurance up to one full calendar day following shipment. 

Now you’ve got the straight dope and can insure your shipped items with confidence, knowing you’ve done it right!

Why It’s Important to Insure Your Ecommerce Packages

When it comes to entrusting your sold items to a postal carrier, insurance can give you more than peace of mind. Although only a relatively small percentage of the billions of packages shipped each year arrive damaged or are lost altogether, that’s no consolation if your package happens to be among that minority.

The bottom line is: If it’s expensive and/or fragile and/or irreplaceable, it pays to insure it.

Buying insurance does increase the overall cost of shipping, so it is not a service to be added willy-nilly. But as an online seller, you’re responsible for getting a sold item to the buyer in its original condition.

 If it arrives broken — or worse yet, doesn’t arrive at all — then you’re on the hook for a refund of that buyer’s payment, whether you insured their package or not. Better to pay for insurance and not need it than the other way around!

As for the covering the cost of insurance, you have several options. Bear in mind that eBay no longer allows sellers to charge buyers for insurance as a specific line item. However, you can fold it into your handling charge. If you’re offering free shipping, factor insurance into the item’s price as part of the cost of shipping. Otherwise, any refund is going to come straight out of your pocket.

Proper packaging is essential to preventing breakage enroute, but it’s not foolproof. The most carefully packed item may still turn up in pieces upon delivery. Worse yet, the carrier’s insurance may not cover it.

For example, USPS specifically excludes “Articles so fragile that they cannot be carried safely in the mail regardless of packaging” as well as “Articles not adequately prepared to withstand normal handling in the mail.” Those terms leave a lot of wiggle room when it comes time to file a claim!

A certain amount of insurance may be included in the cost of postage. UPS and FedEx routinely provide up to $100 in insurance on every package they ship, while USPS’ Priority Mail rates automatically include $50 insurance ($100 for USPS Priority Mail packages shipped through eBay). 

In some cases, this is perfectly adequate — except when it isn’t. For pricey and fragile items such as electronics, jewelry, and many kinds of collectibles, that’s not going to be sufficient coverage to compensate for loss of or damage to that item. 

In addition, it’s important to be sure to insure items for full market value, not just the amount for which you sold them. Under-insure an item, and you may still end up out of pocket; over-insure it, and the carrier may dispute the value.

Remember too that shipping insurance is to protect you as the seller, not the buyer. For items sold on eBay, the buyer is covered by eBay’s Money-Back Guarantee, which states, “Get the item you ordered or your money back.” Other marketplaces likewise expect you to refund the buyer for lost or damaged items, whether or not you in turn are reimbursed for doing so.

In sum, as with any other form of insurance, postal insurance essentially boils down to a gamble: You’re betting that your item may be damaged or even lost in transit, while the insurance provider is betting that it won’t. It’s a bet you’d rather lose, of course, but insuring your packages ensures a win-win situation every time.