Business basics: Shipping insurance

By Oleg Mikhailenko
Published in Solutions
August 19, 2022
4 min read
Business basics: Shipping insurance

Shipping insurance is an important thing for any ecommerce merchant to consider. You’ve almost certainly thought about it whenever you’re at the checkout counter for your preferred courier partner, and the front desk worker asks you whether you’d like to insure packages to make sure that you’re reimbursed in the case of any loss or damage. But is post office insurance really worth it for a small business owner? Isn’t that just for big retailers that can afford to throw money around? What is shipping insurance, really, and how does it protect you? Read on to find out.

What is package insurance?

To insure your package means to take out an insurance policy that protects against loss, damage, or theft. This is almost always purchased at the point of departure when your shipping label is generated, and means that your entire package will be replaced or reimbursed up to the monetary value you’ve insured for. This means it’s especially important to insure your package properly- if you’ve bought a policy that insures up to 100 dollars but you’re transporting 300 dollars worth of merchandise, you’ll only be getting that 100 dollars back should something go wrong.

How much is shipping insurance?

The simple answer to the question of how much it costs to insure post is “it depends”. I know, not a very satisfactory answer, but hold on a moment. Are you talking about a letter you’re sending to your friend in another town, or pallets and pallets of international cargo freight? There’s a whole world of options between these two extremes, so it’s helpful to break down this question into smaller boxes. When it comes to air or marine freight, most brokers charge on the basis of a couple of percentage points. If a carrier offers insurance for up to 60% of the value, for instance, which is quite standard, you might pay up to two dollars for every hundred dollars of value. That’s really not very much when it comes right down to it.

Postal insurance rates, however, are a bit more variable. When it comes to priority mail insurance included is the default that pretty much all major carriers conform to. For USPS, standard shipments can be insured up to 5,000 dollars, and pricing depends on value but starts at only $1.45. Insurance can be purchased and added to shipping labels from the comfort of your own home, so it’s an excellent choice for small businesses and can easily be wrapped up in the delivery fee handed over to the customer at checkout. FedEx offers coverage for values up to $100, and then it’s three dollars more to increase coverage to $300. Prices scale from there. UPS similarly offers free coverage up to $100, and charges extra from that point on.

Is first class mail insured?

As a rule, all parcels sent through first class mail are insured against loss or damage. That’s part of the benefits you get by paying a premium for first class. If you want to be extra sure of where your merchandise is at all times, USPS also provides monitoring for small goods weighing less than 13 ounces. Unfortunately, letters and flat mailers have no tracking capabilities. Of course, if you’re extra worried about your items, additional post office insurance can always be purchased for an additional price. But if you’re already paying for first class service, you may be gilding the lily just a tad.

What does discreet shipping mean?

Selling products in your store that your average customer may not want to be displayed to the entire neighborhood should your courier partner drop it on their front porch? No judgment here! We all have to order things we don’t want listed in this week’s neighborhood gossip column. When you select this option, your merchandise is delivered in a plain, opaque cardboard box. Often there’s not even a company name or any branding printed on the packaging. The only markings are typically just the shipping label to tell the delivery service where to send the parcel. No one can look at the package and deduce what could be inside.

How worried should I be about all of this?

Alright, you might say. I understand that there’s a chance that any given package might get lost. But how likely is it to happen to me? Is coverage for damage or disappearance really something I should factor in? The short answer is absolutely yes. Even just looking at domestic shipments of parcels, 1.7 million boxes go missing in the United States every single day. In some cities, the percentage is as many as one in ten. In New York City alone, up to 90,000 packages disappear without explanation each and every day. This isn’t just due to postal carrier negligence or a distribution error, of course. Part of this is the result of the ever-growing epidemic of package theft by people colloquially known as porch pirates, which annoy merchants and customers alike on a daily basis and make it an irritating and costly process to ship and insure. Good business practice demands that merchants replace items that go missing during transit, meaning that package piracy results in countless dollars in losses. Current estimates put yearly losses due to parcel theft at 25 million.

In conclusion

In this day and age where the global supply chain seems more tenuous than ever, it’s simply ill-advised to forgo any sort of protective action on your merchandise. Cargo accidents, mistaken reroutes, and outright theft can take a serious bite out of your bottom line if you refuse to be proactive and purchase coverage ahead of time. Insurance is easy to get and costs only a scant percentage of the value of the goods in question. When you take a step back and examine your options, it’s a no-brainer. P2Pseller can help you acquire coverage for your shipments through our contracts with major courier services, meaning that you pay less to keep your items safe than you would if you went to these companies as an individual. Register a free account with us today to see all of our offerings and prices up front before committing to anything. We’re ecstatic to help you grow your business bigger than ever before.


Previous Article
Why an inventory strategy is important for your ecommerce endeavor

Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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