Shipping insurance: what it is, when you need it, and how to get the most out of it

Packages get lost. They show up damaged. And porch piracy continues to be a huge problem. In fact, package thieves stole $8.2 billion worth of online orders in 2025 alone. When something goes wrong with a shipment, the customer isn't calling the carrier. They're calling you.

Shipping insurance is how you protect your business when that happens. Here's what you need to know.

What shipping insurance actually covers

Shipping insurance reimburses you if a package is lost, stolen, or damaged in transit. With Shippo Total Protection, that means the total order value, the original shipping label, return shipping on damaged parcels, and the reshipping label, not just the item inside.

What it doesn't replace: the time spent dealing with a frustrated customer. That's why faster claims matter as much as coverage itself.

Declared value vs. actual insurance

Most carriers include a base level of what they call "declared value coverage" with their shipping services, ranging from $20 to $100, depending on service level, for USPS Priority Mail, FedEx, and UPS. It's easy to mistake this for insurance, but it works differently.

Here's the key difference: with declared value, you can only get reimbursed if you prove the carrier caused the loss or damage. The carrier is essentially capping their own liability, not guaranteeing you'll be paid. With actual insurance, like Shippo Total Protection, you file a claim based on what happened, not on proving who was at fault.

A simple example: say you ship a $300 item and it arrives broken. With carrier declared value, you'd need to demonstrate the damage was caused by the carrier's mishandling. If there's any ambiguity, the claim can be denied. With third-party insurance like Shippo Total Protection, you document the damage and file. The claims process doesn't hinge on fault.

Both FedEx and UPS are explicit about this on their own websites: declared value is not insurance. To get actual coverage for the full value of what you're shipping, you need to purchase additional coverage through the carrier or go with a third-party provider.

Carrier coverage vs. third-party insurance

When something goes wrong with a carrier-covered shipment, you file a claim through that carrier. Each carrier has its own rules, timelines, and exclusions, and claims can take weeks to resolve. One important thing to know: most carriers have strict deadlines for filing. Miss the window and you forfeit your right to reimbursement, regardless of what coverage you purchased.

Third-party insurance tends to offer broader coverage, simpler, faster claims submissions and processing, and better pricing. Because it sits outside the carrier relationship, you don't have to prove the carrier was at fault. You just file, document, and get reimbursed. If you're shipping across multiple carriers, third-party insurance also gives you one place to manage everything, instead of tracking claims across USPS, UPS, and FedEx separately.

What carriers typically offer

• USPS: $100 automatic coverage on Priority Mail, Priority Mail Express, and Ground Advantage. Additional coverage available up to $5,000 for most services.
• UPS: $100 automatic coverage on domestic shipments. Additional declared value coverage available up to $50,000 per package. UPS Ground saver is limited to $20.
• FedEx: $100 automatic coverage on all domestic shipments. Additional declared value available up to $50,000 for Express services, but FedEx Ground caps coverage at $2,000 per package. Items like jewelry and artwork are limited to $1,000 regardless of service.
• DHL Express: Offers "all risks" shipment value protection with no deductibles.

Shippo Total Protection

Through our partnership with XCover, we offer third-party shipping insurance called Shippo Total Protection. Here's what makes it worth considering over carrier-based coverage:

Pricing with no minimums Coverage costs 1.25% of your package's declared value for domestic shipments and 1.50% for international. No minimum charge, no matter how low the order value. Shipping a $20 item domestically? You pay $0.25, not the $1 minimum carriers and other insurance options typically charge.

Porch piracy coverage Stolen packages are covered. One in four Americans has had a package stolen at some point, and 9 million adults have had a package stolen in just the last three months (and that number climbs during the holidays and during large company sales). Standard carrier coverage stops the moment a package is scanned as delivered. Shippo Total Protection doesn't.

Global coverage Shipments originating from the U.S., Canada, UK, Germany, Spain, Italy, and the Netherlands are covered worldwide (excluding sanctioned countries).

Fast claims — most resolved in 3 days File through the XCover online portal, accessible directly from your Shippo dashboard. Track your claim status in real time. About 95% of claims are processed and completed within 3 business days.

Live phone support If you need help with a claim, you can reach a real person. Shippo Total Protection includes live phone support through XCover, Monday through Friday, 9am–5pm ET, at +1 (888) 883-6522. Most shipping insurance providers rely entirely on email. But if you've ever been stuck waiting on a reply while a customer is asking where their package is, this is the difference.

Branded package coverage Branded packages are also covered, so you can protect your shipments while maintaining your brand identity. See terms and conditions for restrictions.

Automated insurance You can set Shippo to automatically add coverage to all shipments or any order over a specified value. See how to set it up in our help center. It’s one less thing to think about during a busy fulfillment day.

What Shippo Total Protection doesn't cover

Some items are excluded regardless of value:

• Perishables: food, pharmaceuticals, plants, chemicals (wine is the exception)
• Valuables: precious metals and stones, cash, bullion, securities, documents
• Contraband

Certain items also require signature confirmation to be eligible for coverage, including laptops, TVs, and jewelry worth more than $250. Some item categories carry a 25% deductible: antiques and artwork, glassware and ceramics, and watches and jewelry.

Coverage terms, including any applicable deductibles or sublimits by item category, are detailed in the Shippo dashboard before checkout and may be updated as our policy evolves. Always review current terms before purchasing.

When does shipping insurance make sense?

The honest answer: more often than you might think.

The obvious cases are high-value items, fragile products, and international shipments. Longer transit times mean more opportunities for things to go wrong, and the further a package travels, the harder it is to recover quickly.

But with Shippo Total Protection pricing starting at 1.25% of item value, it's worth doing the math on lower-value orders too. If you're shipping 500 orders a month and even 1-2% arrive damaged or go missing, the cost of eating those losses adds up faster than the cost of coverage.

A useful exercise: pull your last 90 days of shipping data and look at how many claims or customer complaints you had related to lost, damaged, or stolen packages. Compare that to what blanket insurance would have cost you. Most merchants who run that math end up automating coverage across all orders.

How to add insurance in Shippo

Adding coverage during label purchase takes about 10 seconds:

1. Go to the Orders page and create a label
2. Fill in package details and select your carrier service
3. In the side panel, click "Add" next to the coverage amount
4. Adjust the insured value if needed (it defaults to the full item value)
5. Click "Add insurance," review the total, and buy your label

You can also set insurance to apply automatically to all shipments or any order over a threshold you define. How to Turn On Automatic Insurance

For API users, insurance can be added programmatically. See our API docs for details.

Need help? Submit a ticket at shippo.com/get-help and our team will get back to you.

What you'll need if you have to file a claim

Act quickly: most carriers and insurance providers have strict claim deadlines, and missing them can mean losing your right to reimbursement entirely. With Shippo Total Protection, start a claim  as soon as you're aware of a problem, even if you do not have all the information to complete the claim.

Here's what XCover typically requires:

For damaged packages: Photos or video of the damaged items, photos of the original packaging, a commercial invoice, and a shipping receipt.

For lost or stolen packages: Photos of the original packaging, a commercial invoice, a shipping receipt, and — for porch piracy claims — a police report and proof of ID.

Keep records for every shipment: tracking numbers, declared values, proof of item value (receipts or invoices), and any additional insurance purchased. Having this ready before something goes wrong makes the process much faster when it does.

Most claims submitted with complete documentation are resolved within 3 business days. If you have questions along the way, phone support is available Monday through Friday, 9am–5pm ET at +1 (888) 883-6522.

Frequently asked questions

What does shipping insurance cover? Shipping insurance reimburses you if a package is lost, stolen, or damaged in transit. With Shippo Total Protection, coverage includes the total order value, the original shipping label cost, return shipping for damaged parcels, and the reshipping label. It also covers porch piracy, which standard carrier coverage does not.

What's the difference between carrier liability limits and shipping insurance? When you enter a package's declared value in Shippo, you're telling the carrier what the item is worth. But carriers use that same term to describe their own liability cap, which works very differently from actual insurance. It's the maximum they may pay out, not a guarantee. To receive a payout, you typically have to prove the carrier caused the loss. Actual shipping insurance (like Shippo Total Protection) pays based on the loss itself, regardless of fault, and tends to have faster, simpler claims.

When should I buy extra shipping insurance? Any time you're shipping items worth more than $100, fragile or high-value goods, or international shipments. But given how affordable third-party coverage is, many merchants find it makes sense to insure all shipments automatically — especially during peak season when shipping volume and theft rates both rise.

How much does Shippo Total Protection cost? 1.25% of the package's declared value for domestic shipments and 1.50% for international. No minimum fee. A $50 domestic shipment costs $0.63 to insure. A $200 international shipment costs $3. The cost also includes the label, so you don’t lose out on the original shipping cost. 

How long does a claim take? About 95% of Shippo Total Protection claims are processed and reimbursed within 3 business days of filing. Claims are handled through the XCover online portal, and you can track status in real time and see your policy and claims history in one place.

What do I need to file a claim? For damaged packages: photos of the damage and original packaging, a commercial invoice, and a shipping receipt. For lost or stolen packages: photos of the packaging, a commercial invoice, a shipping receipt, and — for porch piracy claims — a police report and proof of ID.

Does shipping insurance cover the label cost too? Yes. Shippo Total Protection covers both the item value and the original shipping label cost. For damaged packages, return shipping and the reshipping label are also covered.

Can I add insurance automatically to all my orders? Yes. You can set Shippo to automatically apply coverage to all shipments or any order over a value you define. Learn how to set it up here.

Originally published September 2020. Updated June 2026.