Is Shipping Insurance Worth It? A Cost-Benefit Analysis
To add shipping insurance or not to add shipping insurance? That is the question e-commerce businesses have to ask themselves almost every time they ship out an order.
While it may seem like another added expense, there are a few eye-opening stats that every business owner should consider:
With the shipping process being so vital to customer retention, and damage + lost packages being so prevalent in the world of e-commerce today, the best safeguard for your shipments is often through shipping insurance.
While you’re trying to decide whether shipping insurance is really worth it, let us help answer some of your questions, such as what it is, what it does, how much it costs, what your options are, and a look at the cost-benefit analysis for your particular business.
What Is Shipping Insurance?
Shipping insurance is an added service to your shipment that protects it against damages during transit or if it gets lost in transit. By adding shipping insurance to your package you can be reimbursed the declared value of the products within the package in the event they arrive at the customer damaged, delivered but stolen, or never arrive to the customer at all.
Shipping insurance works similar to getting insurance of other types. You’ll pay a small fee initially but will be able to have peace of mind in the event that anything goes wrong with your product.
How Much Does Shipping Insurance Cost?
The cost of shipping insurance will depend on either the carrier you’re using to send your package, the software you use to generate a label, or the third-party insurance company you’re using to insure your package.
There is also the option to pass this fee onto the customer so you don’t pay anything at all. However, that cost is a less positive experience for your potential customer and can deter them from purchasing on your site.
Cost of USPS Shipping Insurance
If you’re sending your packages with the US Postal Service, the price for USPS insurance will be affected by the declared value of the shipment. Fees start at $2.45 and increase as the declared value of your package goes up.
Cost of UPS Shipping Insurance
The maximum declared value will depend on your shipping method. If you’re shipping from a UPS Store the maximum is $50,000, but if you’re shipping via a third-party retailer the limit is $1,000. If you’re shipping from UPS Drop Box the limit is $500. More information can be found here.
Cost of FedEx Shipping Insurance
The $100,000 maximum declared value limit for FedEx shipping insurance is available to those who sign up for the high-value jewelry shipping program and only applicable to domestic shipments. International shipments have a limit of $25,000.
Cost of Third-Party Shipping Insurance
Using a third-party shipping insurance can be a great way to lessen the cost of protecting your products during the delivery process. As an example, we’ll look at using Shipsurance via Shippo. Let’s say you’re shipping an electronic device worth $150, and you’re looking to insure your product before shipping it.
You can see that by choosing shipping insurance through Shipsurance via Shippo can save you up to 48.82% on your shipping insurance cost.
When Is Shipping Insurance Worth It?
Determining whether or not shipping insurance is worth it will largely depend on the items you’re selling and the distance they are traveling. Let’s look at two examples:
For the first example, let’s say you sell low-cost t-shirts on your site with the maximum retail price of a shirt being $25. If you’re shipping with UPS or FedEx, you’ll already be covered for the cost of shipping a t-shirt because it falls under the $100 declared value.
If you’re choosing to ship with USPS you may want to consider insurance. Given the fact that nearly one in 10 shipments are lost, stolen, or damaged, the cost of insurance may be less than the potential loss of a shirt.
Another example: if you’re shipping bigger ticket items like electronics, furniture, or jewelry with a minimum price of $100 or more, adding insurance is an excellent tactical choice. For oversized items like bedding and furniture alone, 21% arrive at the customer damaged.
Let’s say you sell 10 products at $150 each and add shipping insurance to every shipment – if you’re using Shipsurance via Shippo, your total cost of insurance for those 10 packages would total up to just $18.80. If you went through without insuring your items and something unfortunate happened during the shipping process, your business would be at a loss of $150. In this instance, spending a little extra to insure your products would outweigh the risk of trying to cover the total price of one item should anything happen to it.
Another thing to consider is the distance at which packages travel. Oftentimes the further the package has to travel, the increased likelihood the package switches hands, and the higher chance that it could get lost or damaged on its way to the customer. This is the case for many domestic and international shipments.
If you’re shipping to customers solely within your region, this may not be as much of an influence for adding insurance, but for e-commerce businesses who sell across the country or worldwide, it is highly worthwhile to consider shipping insurance.
Shipping with A Third-Party Insurer
Shippo partners with Shipsurance to offer shipping insurance at up to 50% of the cost of most major carriers so you can provide additional care and white-glove service to your customers and their packages at a low price.
Shipsurance is a shipping insurance company offering coverage for shipments sent via the major shipping carriers worldwide.
One of the main differences between using a company like them versus relying solely on the major carriers is that Shipsurance is often able to process claims faster and smoother. This means that your business is able to process new shipments or issue refunds to customers as soon as possible, without having to wait for payment on the original shipment.
What Does Shipping Insurance Do?
By adding shipping insurance through Shippo, your orders are guaranteed:
Easy Claims Process
With a paperless claims process, take your time to capture all your documentation for a smooth filing experience completely online.
Fast Reimbursements
Get your claims back quickly through a physical check or via PayPal. Get your money back to keep your business liquid.
Affordable Premiums
Keep insurance affordable and costs down for your business and your customer. You’ll only pay 1.25% of the insured shipment value. Bonus: Pro/Premier Plan users only pay 1%!
How To Insure Your Packages with Shippo
Whether your orders are valued at $15 or $1500, keep your customers feeling secure and satisfied by adding shipping insurance. Protecting your packages through this simple step will guarantee you get your money back in a quicker, hassle-free fashion than the complicated steps generally required by major carriers.
Don’t just stop at the monetary protection – make sure you’re protecting your products physically, too! Choosing the right infill to put inside your packages can help in this regard.
Additionally, for any orders that have the same items and value, you can easily add insurance to multiple orders, saving you time and a few extra clicks.
Though shipping insurance offers coverage for most items and products, please keep in mind the few exclusions, such as currency, neon items, hazardous material, monitors, screens, television, mobile telephones, perishable cargo or similar property, automobiles, motorcycles, live animals, flowers, plants, cigarettes/cigars, tobacco, plated glass, stained glass, and float glass. See Shipsurance Terms of Service for the full list.
