All Things Shipping
Sep 17, 2020

An Overview of Shipping Insurance

Shipping insurance—just like other types of coverage—can provide you with extra peace of mind if a shipment goes missing or arrives damaged. In most cases, your shipment will arrive as planned, and in good condition. But as luck will sometimes have it, that’s not always the case. 

The Value of Shipping Insurance

You’ve put a lot of time and effort into your products and in cultivating your customer base, so the last thing you want is to have any of your shipments not arrive as expected. It’s not only very costly but can feel defeating, for both you and your customers. Shipping insurance is all about having a backup plan that optimizes for the unexpected. Depending on the type and amount of coverage, this insurance may help your company to cover its costs if a package gets lost in transit or is damaged to the degree that it is deemed unacceptable by the recipient. Insurance can be purchased from most major carriers, or in some cases, from a third-party company.

This insurance protects the shipper because, if coverage is adequate, then costs can be reimbursed when packages don’t arrive in the right condition. It can also be reassuring to customers that a company values their business. 

Base Coverage: Declared Value

One important aspect to point out is the subject of declared value. What some carriers will initially offer with shipments is not actually shipping insurance, but rather “declared value coverage.” Declared value lists the maximum liability that the carrier may have to pay out if a package is damaged or lost, and has built-in maximum limits and other stipulations. 

One stipulation right off the top, in many cases, is that the package must have been damaged while in the possession of the carrier, and the shipper will need to be able to prove that. The maximum payout limits are generally capped at $100. For items worth more than that, most carriers also offer the option to purchase insurance that will reimburse you for the declared value.

Checking the Fine Print

When considering adding additional insurance coverage, there will be several aspects you’ll need to review closely. For instance, each carrier will have items they won’t cover, as well as certain destinations that won’t qualify for coverage. Plus, there can be coverage limits when shipping certain types of items.

So, any time your business is shipping items and is considering adding insurance, be sure to read the fine print about coverage. Will, for example, the theft of a package be covered? Does the carrier have an exclusion that won’t cover certain items being shipped? Those are just some aspects you’ll need to take into account. For instance, the USPS has a list of items it won’t cover. These can include perishable items, products that are too fragile for safe delivery, or items not packed securely. UPS also has a similar list of items it prohibits or does not provide coverage on. You can’t, for example, get coverage from the UPS on items such as antiques, fish tanks, clocks, and china, to name a few. 

When Does Getting Carrier Coverage Make Sense?

In cases where the value is more than $100, when should a company purchase additional coverage? To make that decision, it can help to picture what might happen if a package got lost or contents were damaged. How would that affect your company? How easily could you replace the contents without a significant hit on your finances? It’s possible that just one occurrence wouldn’t be a big deal but what if it happened several times? What if the package is of especially high value? (Think Murphy’s Law, here.)

Be sure to keep good track of all the packages you ship, keeping organized records of how each one is covered. Which entity is providing coverage for a particular package and for what dollar amount? When you do this—and a customer lets you know that a package hasn’t arrived or it was banged up during transit—then you can move forward to the next steps with more confidence. 

Coverage and Policies

Carrier specifics and other shipping insurance options.


When shipping domestically, the U.S. Postal Service typically automatically provides $100 in coverage on Priority Mail and Priority Mail Express shipments. If your business is using one of these services and the value of products shipped fits within these parameters, then additional coverage may not be necessary. In general, you can purchase up to $5,000 in protection for what you mail, up to the value of the items shipped. Here is more information about USPS options


With a domestic shipment, a UPS package is automatically covered up to $100 against damage or loss. Coverage can typically be purchased up to $50,000 for a package or up to $100,000 per pallet.


As with UPS, domestic packages come with $100 in automatically granted coverage to protect against damage or loss, with options to increase the coverage. It also offers extra services such as FedEx Declared Value Advantage for specialty items such as jewelry, precious gemstones, and other specialty items. 

DHL Express

DHL offers what they call “shipment value protection,” which offers “all risks” shipment value protection with comprehensive coverage” for single shipments, as well as with multiple ones. They note that there are no deductibles.

Third-Party Insurance

As mentioned earlier on in this post, you can obtain coverage from a carrier or from a third party, and here are reasons your business may want to consider the latter option. First, remember that to start, many carriers provide coverage, rather than actual insurance, which means that the amount of coverage purchased is the maximum refund that can be obtained, not a guaranteed dollar amount. With third-party insurance, you can typically cover your shipments for a certain dollar amount.

Plus, with third-party insurance, you can often get better rates, and the savings on each package shipped can really add up over time, boosting your company’s bottom line. And, because the coverage from a third party can be more extensive, you can benefit from both affordability and reliability. Then there’s the convenience factor. Third-party insurance can cover a package from pickup to delivery, without a need for your company to make a claim about carrier fault. 

Here’s another benefit of third-party shipping insurance. If you use more than one carrier, you can have all of your shipping insurance information in one centralized place, which can reduce stress and save time. You’ll know what’s covered on each package, without having to investigate which carrier was used and what that particular carrier will cover. 

Insurance Made Easy

Shippo makes it easy and convenient to protect your packages against damage or loss, whether you’re buying coverage through the carriers or through discounted third-party insurance via XCover. 

When you use XCover through Shippo, you can benefit in multiple ways:

Shippo streamlines the entire shipping process while allowing your business to protect its packages without headaches.

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Kelly Boyer Sagert
is a full-time freelance writer living in the Cleveland area. Her range of expertise spans business, finance, logistics, automotive, e-commerce and more.

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