E-commerce Shipping Insurance: When and How to Insure Your Packages

Shipping insurance protects against loss, damage, and theft during transit. Understanding when to insure and how insurance works helps you make cost-effective decisions while protecting your business and customers.

What Shipping Insurance Covers

Typically Covered

• Loss (package never delivered)
• Damage during transit
• Theft (with evidence)
• Weather-related damage

Not Typically Covered

• Inherent product defects
• Improper packaging
• Delays (unless service-guaranteed)
• Consequential damages
• Items excluded by policy

Carrier Insurance Options

USPS Insurance

Included Coverage:

• Priority Mail: $100
• Priority Mail Express: $100
• First-Class Package: None
• Ground Advantage: None

Additional Insurance:

UPS Declared Value

Included Coverage: $100

Additional Coverage:

• $0.00 - $100: Included
• $100.01 - $300: $3.45
• Each additional $100: $1.15

FedEx Declared Value

Included Coverage: $100

Additional Coverage: Similar structure to UPS, rates vary by service and destination.

When to Insure

Always Insure When:

• Item value exceeds $100
• Item is fragile or breakable
• Item is irreplaceable
• Customer expects protection
• High loss history on route

Consider Not Insuring When:

• Item value under $50
• High volume, low-value items
• Self-insurance is more economical
• Margins can absorb occasional losses

Self-Insurance Strategy

For high-volume sellers, self-insurance may be more cost-effective:

How It Works

Calculate monthly loss rate (typically 0.5-2%)

Set aside that percentage of shipping costs

Use reserve to cover losses

Skip carrier insurance

Example Calculation

Monthly shipments: 1,000 Average value: $50 Loss rate: 1% Expected losses: $500/month

Carrier insurance cost: $2.75 × 1,000 = $2,750/month Self-insurance reserve: $500/month

Savings: $2,250/month

When Self-Insurance Works

• Consistent shipping volume
• Predictable loss rates
• Financial reserves available
• Average order value is moderate

Filing Insurance Claims

Required Documentation

Proof of value

• Original invoice/receipt
• Listing showing sale price
• Cost documentation

Proof of damage/loss

• Photos of damaged item/packaging
• Tracking showing non-delivery
• Statement of what happened

Shipping documentation

• Shipping label copy
• Tracking number
• Receipt of postage payment

Claim Process by Carrier

USPS:

File online at usps.com or in person

Submit within 60 days of mailing

Processing: 5-10 business days

Payment via check

UPS:

File through ups.com

Submit within 60 days

Include all documentation

Processing: 10-15 business days

FedEx:

File through fedex.com

Submit within 21-60 days (varies)

Digital documentation accepted

Processing: 5-7 business days

Claim Tips

• File quickly - Don't wait until deadline
• Document everything - Photos, emails, tracking
• Be specific - Detailed item descriptions
• Follow up - Check claim status regularly
• Appeal if denied - Many denials are overturned

Third-Party Insurance Options

Beyond carrier insurance, third-party options exist:

Benefits

• Often cheaper than carrier insurance
• Simpler claims process
• Higher coverage limits
• Multi-carrier coverage

Popular Providers

• Shipsurance
• U-PIC
• Parcel Guard
• Route (customer-facing)

Considerations

• Compare rates to carrier insurance
• Check claims process reviews
• Understand exclusions
• Verify coverage limits

Insurance Best Practices

1. Know Your Loss Rate

Track claims and losses monthly:

• Number of claims filed
• Dollar amount of losses
• Claims approved vs. denied
• Root causes

2. Packaging Affects Coverage

Insurance can be denied for:

• Inadequate cushioning
• Wrong box size
• Missing inner packaging
• Not following carrier guidelines

3. Accurate Declared Values

Always declare actual value:

• Under-declaring limits recovery
• Over-declaring is fraud
• Keep receipts for claims

4. Consider Product Type

Some products have higher risks:

• Electronics: High theft target
• Glass/ceramics: Damage prone
• Liquids: Restrictions apply
• High-value: Always insure

5. Customer Communication

Be transparent about insurance:

• Offer at checkout when appropriate
• Explain what's covered
• Set expectations for claims

Insurance vs. Replacements

Sometimes replacing items is better than claiming:

Replace When:

• Item cost < insurance + time
• Fast resolution matters
• Customer relationship priority
• Claim likely to be denied

Claim When:

• High-value items
• Clear carrier fault
• Documentation is solid
• Pattern suggests systemic issue

Conclusion

Shipping insurance is a balance between protection and cost. The right approach depends on your:

• Order values
• Shipping volume
• Loss history
• Risk tolerance

For most sellers:

• Insure items over $100
• Self-insure low-value, high-volume items
• Document packaging process
• Track and analyze losses

AtoShip makes adding insurance easy—compare coverage options alongside shipping rates and add protection with one click when it makes sense for your shipment.