• Home
  • > Blog
  • > What Is Shipping Insurance and Do I Need It?

When eCommerce companies first start shipping their orders, they tend to grab shipping insurance on every package just in case. This is an excellent practice for when you’re starting, but there might be some alternatives to consider.

Let’s take an in-depth look at shipping insurance to understand how it can help your business when a package is lost or damaged and when these costs are smarter than replacing an item purely out-of-pocket.

What is shipping insurance?

Shipping insurance is a product offered by carriers to cover a specific shipment. It generally protects you against damaged, stolen, or lost packages. You are reimbursed based on the declared value of the items you ship when the products arrive damaged or don’t arrive at all.

It’s all about peace of mind and protecting your business.

Carriers base shipping insurance on the declared value of what you ship with some minimum costs and coverage amounts. There are also some coverage and payout caps, as well as requirements that you be able to demonstrate damage occurred in transit. So, always read the fine print .

Shipping insurance almost always comes from the carriers themselves, though there are third-party options as well. These are most commonly used if you’re shipping an expensive item or moving freight because you need coverage beyond the value-caps that carriers put in place.

If you’re interested in learning more, please contact us directly . There’s a lot of additional information that impacts pricing, availability, and what is covered. Generally, you can get a better rate per shipment, but you most often have to purchase third-party coverage across a specific number of orders.

Shipping insurance costs by carrier

Learn about shipping insurance and more in our eCommerce shipping guide .

Like many other things, UPS and FedEx have some similarities in their shipping insurance pricing structure. The 2020 updates have brought the two in-line for most small shipments and individual packages. However, you will start to experience some differences in freight and at high volumes (mainly due to a combination of calculations and available discounts).

USPS updated some of its pricing in October 2020, and according to that new rate sheet , here are your likely insurance costs.

USPS: Standard Mail  
Declared Value Insurance Cost
$0.01 – $50.00 $2.25
$50.01 – $100.00 $2.85
$100.01 – $200.00 $3.55
$200.01 – $300.00 $4.70
$300.01 – $400.00 $5.90
$400.01 – $500.00 $7.10
$500.01 – $600.00 $9.55
$600.01 – $5,000.00 Additional $1.40 per $100.00


Priority Mail Express includes up to $100 of insurance and Priority Mail up to $50 in the service price. Additional insurance can be purchased, though the carrier told us prices can vary .

Declared Value Insurance Cost
Up to $100 $0
$100.01 – $300.00 $3.15
Each additional $100 in declared value Additional $1.05


For some FedEx shipments, the carrier also calculates a per-pound cost and charges you whichever is greater. Its service guide ( page 120 ) explains these freight and international differences.

Declared Value Insurance Cost
Up to $100 $0
$100.01 – $300.00 $3.15
Every additional $100 in declared value, up to $50,000 total Additional $1.05


UPS notes that you can get some coverage for larger shipment values — both parcel and pallet — but charges change. Typically they charge $0.009 times the declared value for these items, but there are some other calculations to consider ( see page 115 ). Another thing worth noting is that insurance for in-transit goods is available through UPS’s affiliate, the  UPS Capital Insurance Agency, Inc , and not the company directly.

When is shipping insurance worth it?

The answer to that question largely depends on your business. However, there are a few general times that shippers will find the insurance pricing to be right.

The most important note is that shipping at high volumes generally makes it worthwhile when your orders’ total value is significantly higher than the insurance cost. The higher the item value inside, the more likely it is worthwhile. This is one case where you want to add shipping costs to the “value” of the order because you’ll have to repay that if you reship a lost or damaged product.

Your sweet spot is when it costs you less to buy insurance on each product and make claims when things are lost or damaged than it costs you simply to replace the goods.

Shipping insurance claims

Your claims experience will differ based on the product, price, shipping location, and carrier. Every service tries to be uniform, but you can read a million different stories for each one.

In the big picture, you need to file a claim when a package is reported missing or damaged by the customer. Reach out to the carrier or your insurance provider and give them documents for the package, shipping information you have on it, and as much proof as possible that it looked okay when you shipped it. That’s why many 3PLs take photos of every order before a carrier picks them up at our location.

For lost or stolen items, carriers generally search within their network. On average, they’ll ask for 10 to 14 days to search for the product. Claims are usually processed in two to three business days, so the process is relatively quick.

The more information you can provide, the better. Generally, you won’t need to do much with the customer beyond confirming the package was damaged or not received, but it’s best to be proactive about these issues and quickly start your replacement process.

Ask for a discussion unique to you

Shipping insurance is right for businesses in most cases, but your products make an enormous difference. There are some liabilities and additional concerns that can’t be captured by general forms and standard responses.

If you’re considering E-commerce fulfillment and don’t know if insurance is right for you, get in touch . We’ll point you in the right direction on packages and protections, plus discuss if third-party services are right or wrong for you. 

Red Stag 蜂鸟电竞数据 only ends up doing business with a small number of companies that contact us each month. However, we give everyone who calls or emails our best answer and support. Sometimes that means pointing them to other services and companies best suited to their needs.