Should your ecommerce business offer shipping insurance to customers? It’s a simple question, but finding an answer isn’t quite so simple.
On one hand, insurance is an excellent way to protect your business financially. Without insurance, you could end up losing the value of an expensive or valuable product and paying for a replacement. And if you don’t offer replacements or refunds for lost, damaged, or stolen packages, customers may leave negative online reviews that damage your reputation.
On the other hand, shipping insurance comes with a cost, and it can be difficult to tell if protecting your packages is worth incurring this extra expense. After all, if only a few packages get lost or damaged, it might be most cost-effective to simply pay for replacements.
To make a decision, you first need to know how much shipping insurance costs. Let’s dive in!
Shipping insurance is a service that protects businesses and customers from financial loss if a package is lost, damaged, or stolen. If an insured product arrives damaged—or doesn’t arrive at all—you can file a claim with the insurance provider. After reviewing the claim, the provider will do one of the following:
Shipping with insurance provides peace of mind for both buyers and sellers, as well as a financial security net in case of unforeseen shipping issues. It also helps you provide a great customer experience, as many insurance providers offer a hassle-free, streamlined claims resolution process.
Shipping insurance costs vary by provider and are based on a package’s declared value. The more valuable something is, the more it costs to insure it during shipping.
Carriers such as USPS, UPS, and FedEx provide liability coverage for packages that are lost or damaged due to mistakes on their part. For shipments with a declared value under $100, this coverage is free. Anything over $100 has an additional fee, which you can find in the tables below.
Third-party shipping insurance is often less expensive than carrier coverage. For example, a provider might offer insurance for 1% of a package’s value. That means insuring a product worth $250 would cost just $2.50. Declaring a value of $250 would cost $6.05 with USPS, $4.35 with UPS, and $4.20 with FedEx.
Costs vary, so talk to your insurance provider for an accurate estimate.
Carrier liability coverage depends on a package’s declared value, and declaring a value greater than $100 requires an additional fee. The fees in the tables below were effective as of January 2024.
USPS has a maximum liability of $5,000 per package. Coverage for packages worth up to $100 is free for select services.
|
Declared value |
Fee |
|
$0.00 – $100.00 |
No charge |
|
$0.01 – $50.00 |
$2.75 |
|
$50.01 – $100.00 |
$3.50 |
|
$100.01 – $200.00 |
$4.60 |
|
$200.01 – $300.00 |
$6.05 |
|
$300.01 – $400.00 |
$7.60 |
|
$400.01 – $500.00 |
$9.15 |
|
$500.01 – $600.00 |
$12.25 |
|
$600.01 – $5,000.00 |
$12.25 plus $1.90 per $100.00 or fraction thereof over $600.00 in declared value |
UPS has a maximum liability of $50,000 per package.
|
Declared value |
Fee |
|
$0.00 – $100.00 |
No charge |
|
$100.01 – $300.00 |
$4.35 |
|
Over $300.00 |
$1.45 for each $100.00 (or portion thereof) of declared value |
FedEx has a maximum liability of $50,000 per package.
|
Declared value |
Fee |
|
$0.00 – $100.00 |
No charge |
|
$100.01 – $300.00 |
$4.20 |
|
Over $300.00 |
$1.40 per $100.00 of declared value |
While relying on carrier liability coverage can be a good option for infrequent, low-value shipments, many businesses turn to third-party insurance as their shipping volume increases. Third-party insurance is often cheaper, with broader coverage and a smoother claims process. For example, unlike carrier coverage, it protects against porch piracy.
Shipping insurance can easily be added to your ecommerce store with an app or extension like Norton Shopping Guarantee, allowing customers to purchase insurance during checkout or have it automatically added to their purchase.
The way shipping insurance works depends on who purchases the insurance: your business or the customer. Let’s look at things from a customer’s point of view. If a package is damaged, lost in transit, or stolen from a doorstep, the customer files a claim with the insurance provider. This may require providing documentation, including photos of product damage. The carrier or provider will review the customer’s claim and either approve or reject it. If the claim is approved, the customer will receive a reimbursement within a few business days.
If your business purchases the insurance, the process looks very similar. However, your customer service team files the claim instead of the customer.
Learn more about how shipping insurance works.
Carrier shipping insurance covers loss and damage if you can provide proof that the carrier was at fault. It does not cover porch piracy, because carriers don’t take responsibility for anything that happens after delivery is completed. Third-party shipping insurance covers loss, damage, and porch piracy.
Shipping insurance policies are all different, so you’ll need to check your policy to see what’s excluded from coverage. Commonly excluded items include perishables, hazardous or restricted items, currency, and jewelry.
Insurance is a good idea if you ship high volumes or if your products are valuable or fragile. Some merchants provide shipping insurance for all purchases, often increasing prices or shipping costs to cover the insurance fees. Other businesses give customers the option to purchase insurance at checkout for a small fee.
When researching shipping insurance options, consider the following factors:
Ready to begin insuring your packages? For great coverage at no cost to your business, simply give shoppers the option to add package protection at checkout. You can do this with a free app like Norton Shopping Guarantee with Package Protection by EasyPost, available for Shopify and WooCommerce stores. By offering low-cost shipping insurance, you’ll not only give customers peace of mind but will also establish a reputation as a trustworthy brand.