What Is Shipping Insurance?

Once a delivery leaves the warehouse, distribution center, or store, it’s out of your hands—and your control. So what happens if the products you ship get lost, damaged, or stolen? Insuring those shipments helps make sure that you don’t have to cover the costs while keeping your brand reputation intact.

What is shipping insurance?

Shipping insurance helps cover the cost of packages that are lost, damaged, mishandled, or stolen while on the way to their destination. It acts as a safety net, protecting both your brand and your customers, and it can be especially important for high-value items.

Without shipping insurance, your business could lose money when shipments go awry. Whether it’s fair or not, customers tend to blame the merchant for shipping mishaps, and you could be left footing the bill if you don’t want to lose customer loyalty. With insurance, some or all of the cost of lost or damaged items can be recovered. This makes it easier to make things right with buyers, allowing you to avoid frustrated customers and negative reviews.

Many carriers offer insurance, with the cost depending on the provider and the value of the product being shipped. Shipping insurance is often available to purchase through shopping logistics solution like EasyPost.

What kinds of shipping insurance are there? 

The two main kinds of shipping insurance are seller insurance and buyer insurance. Seller insurance is paid for by the business, while buyer insurance is an optional add-on that customers purchase. The type of insurance you choose to provide will depend on your budget and objectives.

Seller shipping insurance

With seller insurance, the seller (that’s you!) insures packages through a carrier or third-party shipping insurance provider. The seller covers the cost of insurance coverage so that customers don’t have to worry about it. Seller shipping insurance has significant advantages, but it also has some downsides.

Pros of seller shipping insurance
  • More control. If you’re the one to purchase insurance, you have more control over the shipping process and can choose the coverage that best meets your needs.
  • Enhanced reputation. Offering package insurance shows you’re committed to customer satisfaction. This can help customers feel safe buying from you.
  • Streamlined claims process. If something goes wrong with a shipment, you can work directly with the carrier to submit a claim, allowing customers to bypass a potentially tedious process.
Cons of seller shipping insurance
  • Expensive. Seller shipping insurance does come with an additional expense. You’ll need to weigh this cost against the benefits mentioned above.
  • Limited customer control. Some customers might prefer having more control over their insurance coverage, which would make buyer shipping insurance a better option for them. 

Buyer shipping insurance

If you choose not to offer seller shipping insurance, offering buyer insurance can help customers still feel peace of mind (especially if they’re making expensive purchases). With buyer shipping insurance, customers can decide whether or not to add extra package protection. They can choose to purchase insurance for their delivery during checkout and cover the cost themselves. 

A recent survey found that about half of consumers said they would be interested in the option to purchase shipment protection guarantees. 

Pros of buyer shipping insurance
  • Customizable protection. Buyer shipping insurance gives customers the flexibility to choose the coverage that best aligns with their needs. For example, someone placing a higher-value order could choose to insure their purchase, while someone buying a less expensive item could opt out.
  • Higher satisfaction rates. Buyer insurance is a lower-cost way to help ensure that more people have a positive shopping experience. You don’t need to pay the premiums, but your customers still have a way to protect their purchases if they choose.
Cons of buyer shipping insurance
  • Additional cost for customers. Price-sensitive buyers might be deterred by the extra cost of insuring orders.
  • Complex claims process. If a shipping incident occurs, the buyer is responsible for handling the claims process with the insurance provider. With additional work for them, and often a longer resolution time, customers might be left frustrated or confused.

Is shipping insurance worth it? 

Shipping insurance comes with an upfront cost—either for you or for your customer—regardless of how many shipments actually get lost, damaged, or stolen, but it also provides a financial safety net for you and peace of mind for your customers.

Helps the bottom line
Shipping mishaps aren’t very common, but they do happen. One consumer survey found that package thefts in the United States over the course of one year amounted to over $2.4 billion in stolen goods. Another survey discovered that damage is the second most popular reason products are returned (after issues with clothing fit). 

Without package insurance, you have two options when shipments run into trouble: either you leave the customer to suffer the financial hit, or you pay for a replacement. Insurance gives you a wonderful third choice. You can replace the product (giving your customer a great experience) without spending extra money.

Promotes customer satisfaction
The importance of the buying experience cannot be overlooked; 88% of consumers believe that the experience they have with a company is just as important as the products or services it provides. You could have the best product in the world, but if someone has a poor experience with your company, they won’t stick around. Shipping insurance helps customers feel valued and secure throughout their customer journey. They can rest easy knowing that if something happens to their order, they won’t lose their money.

Protects the seller’s reputation
You might not be the one responsible for physically delivering packages, but your customers don’t necessarily know that. From their perspective, it’s entirely up to your business to make sure the order they paid for makes it to them safely. If that product doesn’t arrive in good condition (or doesn’t arrive at all), they’ll expect you to replace it at no extra cost. If you don’t, you’re likely to join the 72% of small businesses who report that they’ve received negative customer reviews after shipping problems. Making things right—without making customers jump through hoops—will do a lot to repair damaged trust. People who see that you’re willing to correct mistakes will be more likely to buy from you again, and they’ll share the word with friends and family. 

Build customer trust with Norton Shopping Guarantee with Package Protection by EasyPost

The Norton Shopping Guarantee with Package Protection by EasyPost not only protects packages from theft or damage—it also builds buyer confidence before they make a purchase. When new customers browse your site, the Norton Shopping Guarantee trustmarks on each product page signal that your business is independently verified. And when they check out, customers have the option to add package protection to their orders. It’s a win-win: you get an instant credibility boost, and shoppers know that their packages are safe. 

Learn more about the Norton Shopping Guarantee with Package Protection by EasyPost.

Stay in the know

Subscribe to the Norton Shopping Guarantee blog and receive the latest in ecommerce best practices.