Shipping Insurance
Shipping insurance is coverage that reimburses a shipper for a package lost or damaged in transit, bought either as declared value from the carrier or as a policy from a third-party insurer.
Why it matters for ecommerce brands
Shipping insurance decides how much you recover when packages go missing, and the right choice depends on your loss rate and order value. UPS and FedEx include up to $100 of declared value liability, USPS Priority Mail and Ground Advantage include up to $100 of insurance, and extra coverage costs more per package. For example, buying $0.90 of coverage on 5,000 orders worth $150 each costs $4,500 a month, while reshipping 10 lost orders yourself costs about $1,500. Compare premiums against your actual loss history.
Origin
Shipping insurance descends from marine insurance, whose earliest known contract was written in Genoa in 1347, and from Lloyd's coffee house in London, where underwriters met from 1688.
Common questions
- Is declared value the same as shipping insurance?
- Not exactly. Declared value sets the carrier's maximum liability under its own terms, while shipping insurance is a policy, often from a third party, with its own claim rules. Both reimburse loss or damage, but terms and exclusions differ.
- Do UPS and FedEx include insurance?
- They include declared value liability, not true insurance, of up to $100 per package by default. You can declare a higher value for an added fee, and the carrier's liability terms and exclusions still apply.
- When should a brand self-insure shipments?
- Self-insuring makes sense when your loss rate is low and order values are modest, so premiums would exceed the cost of reshipping. Track loss and damage rates monthly to confirm the math still holds.