Guide to Shipping Insurance: Why You May Want to Consider Shipping with Insurance

Learn about the basics of shipping insurance and how to purchase extra coverage
shipping insurance
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This article is all about protecting yourself with shipping insurance. Before we dive in, do us a quick favor. Imagine you’re going rock climbing. You wouldn’t start climbing without a rope to keep you from falling, right? Think of shipping insurance like that rope. It’s not a luxury—it’s a necessity! With all of the options available today to buy it, there’s no excuse not to. Lucky for you, purchasing shipping insurance is easy and affordable, and we’re here to shed a little light on the matter.

Table of Contents

Does Your Package Already Have Shipping Insurance?

All the major carriers offer shipping insurance as an add-on when you’re shipping a package. Think of it a bit like picking up a side of fries with a burger. That said…did you know that you might already have shipping insurance? That’s right: UPS and FedEx have automatically got you covered if your package is valued at or below $100! Any time you buy a label with either of those carriers, you’ve got $100 of built-in carrier liability at no extra cost to you.

USPS is a bit different. At their Retail Pricing level, USPS covers up to $100 only on Priority Mail Express, and only up to $50 on Priority Mail. Therefore, if your package is valued at more than $100 and you want protection, you’ll need to pay for additional coverage—no matter which carrier you choose.

When shipping with USPS, keep in mind that only Priority Mail products come with built-in insurance. Other services, such as First Class Package, Retail/Parcel Select Ground, and Media Mail do not. So, it always makes sense to purchase insurance for these services especially.

Pro Tip: Buy postage online and don’t constrain yourself to the USPS Retail Pricing level! There’s free USPS shipping software out there that lets you access a special pricing tier of USPS called Commercial Plus Pricing. As a result, YOU get hooked up with the deepest USPS postage discounts possible. What’s even better? When you use shipping software, all Priority Mail products come with $100 of built-in insurance—including special sub-services such as Priority Mail Cubic. That’s perfect for all you small business owners shipping small packages under 20 pounds!

Don’t Forget About Your International Shipments

Priority Mail International and Priority Mail Express International both include $200 of insurance with online shipping software. Unfortunately, First Class Package International doesn’t include insurance. It’s CRITICAL to insure international packages, so we recommend always adding insurance on First Class Package International. Go create your free Pirate Ship account and start shipping at Commercial Plus Pricing today. Pirate Ship is completely free, and you can rest easy knowing your packages are insured!

Understanding Declared Value

Here’s something to wrap your mind around: all three carriers don’t necessarily offer insurance, but declared value coverage. That means if you want extra coverage on top of the $100 that the carriers automatically provide, you’ll need to declare the value of your package. If you don’t, the maximum amount the carrier will cover is $100, even if your package is worth more than that. To put it simply: if you declare that your package is worth $101 and you want that extra dollar of protection, you’ll have to declare it and purchase that extra coverage.

If you declare the value of your package, the cost of insurance varies from carrier to carrier. It also depends on whether you ship your package internationally or domestically. Generally speaking, the major carriers charge a minimum flat fee and a variable fee between $2 to $3 for every $100 of declared value for domestic packages. For all you mathematicians, that equation looks something like this:

Cost of Shipping Insurance = Minimum Flat Fee + (Variable Fee x Number of $100 Increments in Declared Value)

Limitations to Declared Value

Some carriers also have a maximum value you can declare. For example, the maximum value you can declare with USPS on domestic shipping is $5,000 per package (to declare up to $5,000 for USPS, your package must be sent as registered mail). USPS also imposes a maximum declared value of $5,000 for international parcels sent Priority Mail Express International. Declared Value for USPS Global Express Guaranteed is capped at $2,499 and varies based on the country of destination.

UPS, on the other hand, will allow you to declare a value of up to $50,000 per shipment in its regular network (and even up to $200,000 through its subsidiary Parcel Pro), which makes it the best carrier for sending high-value items.

The Major Carriers Won’t Insure Certain Items

Of course, no matter how much you’re willing to pay for protection, the major carriers simply won’t insure certain items. For example, USPS won’t provide coverage for perishable items such as food, live animals, or plants. Similarly, UPS carrier liability won’t cover things like live animals, plants, coins, cash, or precious gems. Therefore, it’s always best to check with your carrier to make sure their coverage even applies to your item in the first place before shipping it out.

Pro Tip: The carriers also won’t cover a package that wasn’t packed correctly, like a ceramic plate in a box without packing material to protect it. Therefore, you always need to pack properly when you ship fragile items! If you don’t pack your items correctly and you try to submit an insurance claim, you’ll likely be denied…and that’s not fun for anybody.

You Can Purchase Third-Party Shipping Insurance

Sometimes it makes sense to purchase shipping insurance through a third-party provider, especially if the item you’re sending is fragile or valuable. It might seem like an extra step to take, but in our experience, it’s often more than worth it. Interestingly enough, purchasing shipping insurance through a third-party provider can save you more money than buying it through the major carriers! Most of them even offer coverage where the carriers won’t. For example, U-PIC covers packages marked as delivered but are missing, while USPS won’t cover that situation with their built-in insurance. There are several different third-party insurance providers, and we’ve listed some below.

These insurance companies specialize in providing coverage, and when you buy postage online with shipping software, you’ll often be purchasing insurance through one of these third-party companies if you elect to add protection to your shipment.

The Shipping Insurance Motto: “Just in Case”

Have you heard that Drake song from 2012 called “The Motto,” in which he coined the phrase YOLO (You Only Live Once)? Well, when it comes to shipping, “just in case” is the motto. Purchasing shipping insurance is the best way to protect yourself in the event that anything happens to your items during the shipping process. You should DEFINITELY insure valuable items through a third-party insurance provider, if that’s the more cost-effective solution. So, do the right thing and spend a few extra bucks to buy shipping insurance. You’ll be glad you took our advice just in case anything goes wrong.

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6 Comments

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  1. Christofer Taylor

    Lots of great info on your site. Super helpful. Thank you. Just a heads up though. Your link to PAF Insurance sends you to a website that is insecure and potentially being used to access peoples personal data etc. I got a quote from them off your site two weeks ago and a link in their “quote email” also sent me to an insecure site attempting to get sensitive or personal data. Not sure what’s up with the company or their site. Just thought you might want to know and/or have more info.

    Reply  
    • Rockwell Sands

      Thanks for the heads-up Christofer! That link has been removed.

      Reply  
  2. tj

    Do you get your money back for the shipping if you buy 200 dollars of insurance on a package that costs 20 dollars to ship or do you have to buy 220 dollars of insurance? If you say 220 then YOU SHOULD TELL PEOPLE…..

    Reply  
    • Rockwell Sands

      Hi TJ – in my experience with shipping software companies, you usually need to include the cost of shipping in the declared value when purchasing insurance. If you declare a value of $200, that’s the maximum amount you can get for a lost or damaged package. Wish I had better news, but I hope this helps!

      Reply  
  3. cara

    hi! do you know of any ecommerce 3rd parties that make the customer liable instead fo the shipper?

    Reply  
    • Rockwell Sands

      Hi Cara, I’ve never heard of any eCommerce platforms that make the customer liable instead of the shipper. Sorry about that!

      Reply  

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