Is Shipping Insurance Worth It?

If your small business regularly ships products or information to customers, you need to understand shipping insurance and what it can do for you.

Shipping services

If your small business regularly ships products or information to customers, you need to understand shipping insurance and what it can do for you. Just because you may have packed it accurately and paid appropriate postage doesn't necessarily mean the product will be safely delivered. Insurance reimburses you for items when they're lost, stolen or damaged.

Once your package leaves the warehouse, think about all the times it will change hands, be scanned and change modes of transportation. In all those transactions, there's the possibility of human error or unforeseen damage to the package. In those cases, having insurance helps save your customer's product and your reputation.

Most carriers provide a minimum amount of insurance for packages, but for more expensive parcels, you can always add more. For instance, United Parcel Service (UPS) covers loss or damage for up to $100 on shipments with no declared value at no extra cost to the shipper. U.S. Postal Service's Priority Mail Express shipments also include up to $100 of insurance and regular Priority Mail shipments include up to $50. For more valuable shipments, you can request additional coverage. For example, when you use UPS, you can declare up to $50,000 per package by entering the declared value when you create a shipment.

If you're not familiar with shipping insurance, keep in mind these four things when considering your purchase:

1. Review All Insurance Providers
The major carriers generally charge $1 or more for every $100 of insurance, but there are a number of third-party companies that provide insurance for shipments at much lower costs.

Do research about your available options, as some providers can offer you cheaper costs for your coverage but their service might be slower. During the holidays, you will probably need speedy service — while, when it's less hectic, the savings might be worth using a less-expensive third-party provider, such as ShipWorks, Shipsurance and PIP (Parcel Insurance Program).

2. Consider the Cost of the Item
If it costs more to insure an item than replace it, it doesn't make sense to buy insurance. In the case of a lost, stolen or damaged item, ensure your customers that you will pay to replace the item.

3. Be Prepared for Claims
Some business owners recommend taking pictures of packages as they leave the business so that in case of damage, you can demonstrate that the parcels were packed and boxed appropriately. If your customer reports a damaged or lost package, you may need those photos to include with your insurance claim. But this could become a major burden to your time, and it can be costly to maintain. What you can do is discuss with your insurance provider the best practices for packaging for your product, particularly if you are shipping globally. That way it will be harder for you insurance provider to deny your claim for inadequate packing materials.

4. Expect Quick Resolutions

The reputation of your business is at stake when items are lost or damaged, so if you're considering purchasing insurance, you should work with a shipper that resolves issues quickly. If you do ever need to use your insurance to recover lost, damaged or stolen packages, most shippers and parcel insurance companies report that they process claims quickly and efficiently. Usually, you'll need to complete an online form, provide all necessary information and wait for the claims process to be completed. The general length of time is seven to 10 days.

Because shipping insurance is fairly inexpensive, quick and easy, it's often worth the peace of mind. You'll be stress-free knowing you're doing everything possible to ensure your customers will receive their products.