Shipping Insurance: When to Insure, Carrier Coverage, and Third-Party Options

Shipping Insurance Fundamentals

Shipping insurance protects against loss, damage, or theft during transit. Understanding coverage options helps balance protection costs with risk management.

Carrier Included Coverage

Standard Liability Limits

Carrier	Included Coverage	Maximum Claim
USPS Priority Mail	$100	$100
USPS Priority Express	$100	$100
USPS Ground Advantage	$0	N/A
UPS	$100 (declared value)	$100
FedEx	$100 (declared value)	$100

Coverage Limitations

Limitation	Description
Declared value cap	Must declare value at shipping
Excluded items	Jewelry, antiques, cash
Packaging requirements	Must meet carrier standards
Filing deadline	60-90 days typically
Proof required	Photos, receipts needed

Additional Carrier Insurance Costs

USPS Insurance Rates

Declared Value	Insurance Cost
$50.01 - $100	$2.25
$100.01 - $200	$3.25
$200.01 - $300	$4.50
$300.01 - $400	$5.50
$400.01 - $500	$6.50
$500.01 - $600	$8.25
Each additional $100	+$1.70

UPS Declared Value Charges

Declared Value	Cost per $100
$100.01 - $300	$3.45
$300.01+	$1.15 per $100

FedEx Declared Value Charges

Declared Value	Cost per $100
$100.01 - $300	$3.45
$300.01+	$1.15 per $100

Third-Party Insurance Options

Provider Comparison

Provider	Rate per $100	Min Coverage	Claim Process
ShipSurance	$0.65-$0.85	$1	Online
Shipsurance	$0.50-$0.80	$1	Online
U-PIC	$0.45-$0.75	$1	Online
Parcel Guard	$0.55-$0.90	$100	Online/phone

Savings vs Carrier Insurance

Package Value	Carrier Insurance	Third-Party	Savings
$200	$3.25	$1.30-$1.70	48-60%
$500	$6.50	$3.25-$4.25	35-50%
$1,000	$13.20	$6.50-$8.50	36-51%
$2,000	$30.20	$13.00-$17.00	44-57%

Third-Party Advantages

Advantage	Description
Lower cost	40-60% savings typically
Broader coverage	Often includes more item types
Easier claims	Online filing, faster processing
Multi-carrier	Same policy across carriers

When to Insure

Always Insure

Item Type	Reason
Value > $100	Beyond carrier coverage
Electronics	High damage rate
Fragile items	Glass, ceramics
Jewelry	Often excluded by carriers
Antiques	High value, irreplaceable
Art	Unique items

Consider Based on Risk

Factor	Higher Risk	Lower Risk
Distance	Zone 7-8	Zone 1-3
Season	Peak (Nov-Jan)	Off-peak
Carrier	USPS (higher loss rate)	UPS/FedEx
Address	Rural, apartments	Business
Product	Liquids, fragile	Soft goods

Cost-Benefit Analysis

Order Value	Loss Rate	Insurance Cost	Break-Even
$100	1%	$0.65	0.65% loss rate
$250	1%	$1.63	0.65% loss rate
$500	1%	$3.25	0.65% loss rate
$1,000	1%	$6.50	0.65% loss rate

Rule of thumb: If your loss rate exceeds 0.65%, insuring all packages saves money.

Claims Process

Filing Requirements

Carrier	Deadline	Required Documentation
USPS	60 days	Photos, receipt, tracking
UPS	60 days	Photos, receipt, packaging
FedEx	60 days	Photos, receipt, packaging
Third-party	30-90 days	Varies by provider

Documentation Best Practices

Item	Purpose
Packing photos	Prove adequate packaging
Product photos	Prove item condition
Receipts/invoices	Prove value
Tracking info	Prove shipment details
Customer statement	Support claim narrative

Claim Success Factors

Factor	Impact
Good packaging	Higher approval rate
Clear documentation	Faster processing
Accurate declared value	Appropriate payout
Timely filing	Within deadline

Insurance Strategy by Business Type

Low-Value Products (< $50)

Approach	Rationale
Self-insure	Insurance cost > expected loss
Raise prices slightly	Build in loss buffer
Replace without claim	Better customer experience

Math: 1% loss rate × $30 avg = $0.30 expected loss per order Insurance cost: $0.65+ per order

Medium-Value Products ($50-$200)

Approach	Rationale
Selective insurance	Insure fragile/high-risk only
Third-party insurance	Lower cost than carriers
Risk-based rules	Automate decisions

Example rules:

Fragile items: Always insure
Zone 6+: Insure over $100
Standard: Insure over $150

High-Value Products (> $200)

Approach	Rationale
Always insure	High loss impact
Third-party for savings	40-60% cheaper
Require signature	Reduce theft claims

Self-Insurance Considerations

When Self-Insurance Works

Factor	Consideration
High volume	Predictable loss rates
Low value items	Small individual impact
Good packaging	Lower damage rate
Reliable carriers	Lower loss rate

Self-Insurance Math

Monthly Orders	Avg Value	Expected Loss (1%)	Insurance Alternative
500	$50	$250	$325
1,000	$75	$750	$650
5,000	$100	$5,000	$3,250

Break-even: Around $75 average order value at 1% loss rate

Setting Up Self-Insurance

Track actual loss rates (minimum 6 months data)

Calculate expected monthly loss

Set aside reserve (2-3x expected)

Review quarterly and adjust

Automation Opportunities

Rule-Based Insurance

If order_value > 100:
  Add insurance at declared value
If product_category == 'electronics':
  Add insurance at declared value
If destination_zone >= 6 AND order_value > 75:
  Add insurance at declared valueIf signature_required == True:
  Skip insurance (theft risk mitigated)

Integration with Shipping

Platform	Insurance Options
Atoship	Built-in third-party options
ShipStation	Partner integrations
Shopify	App marketplace

Best Practices Summary

Do's

Insure high-value items (> $100)
Use third-party for savings
Document packaging thoroughly
File claims promptly
Track loss rates

Don'ts

Over-insure low-value items
Skip insurance on fragile items
Ignore packaging requirements
Wait to file claims
Declare incorrect values

Optimize Insurance with Atoship

Create your Atoship account for integrated third-party insurance options at discounted rates.