Shopify Shipping Insurance: When You Need It & How to Save

The Shipping Insurance Question

Every Shopify merchant faces the same dilemma: insure packages and eat the cost, or risk claims and unhappy customers?

Let's break down exactly when insurance makes sense and how to optimize costs.

What Does Shipping Insurance Cover?

Covered:

• Lost packages (never delivered)
• Damaged packages (visible damage)
• Stolen packages (with carrier evidence)

Not Covered:

• Customer claims item not as described
• Late delivery
• Refused delivery
• Incorrect address (your fault)
• Prohibited items

Carrier Included Insurance

Most carriers include basic coverage:

Note: USPS Ground Advantage includes $0 insurance. Big change from Priority Mail!

When to Buy Additional Insurance

Always Insure:

• Items over $100 in value
• Fragile items (electronics, glass, art)
• High-loss categories (jewelry, phones, luxury)
• International shipments

Skip Insurance For:

• Items under $50 (self-insure)
• Items with low damage risk (clothing, books)
• Items you can easily replace

The Self-Insurance Math

Should you insure every package or absorb some losses?

Scenario: 1,000 packages/month, average value $75

Industry loss rates:

• USPS: 0.5-1% packages
• UPS: 0.3-0.5% packages
• FedEx: 0.3-0.5% packages

Self-insurance makes sense when:

(Package value × Loss rate) < Insurance cost
Example: $75 × 0.6% = $0.45 < $0.80 insurance
→ Self-insure!

Insurance Options for Shopify Sellers

#### Option 1: Carrier Insurance Purchase through USPS, UPS, or FedEx directly.

USPS Insurance Rates:

Pros: Built into carrier website Cons: Expensive, slow claims process

#### Option 2: Third-Party Insurance Companies like Shipsurance, Route, or U-PIC.

Typical Rates:

Pros: Cheaper, faster claims Cons: Another vendor to manage

#### Option 3: Atoship Included Insurance

With Atoship:

• Up to $100 coverage included FREE on all shipments
• Additional coverage available at competitive rates
• One-click claims process
• 5-day payout on approved claims

Setting Up Insurance in Shopify

For Built-in Carrier Insurance:

Settings → Shipping

Enable carrier calculated rates

Insurance option appears at checkout

For Third-Party Insurance:

Install insurance app (Route, etc.)

Customers can opt-in at checkout

Or include automatically in price

For Atoship Insurance:

Settings → Insurance

Choose coverage level

Automatically applied to qualifying shipments

Pass Insurance to Customers?

Three approaches:

Approach 1: Include in Product Price

• Add average insurance cost ($0.50-1.00) to all products
• Customer sees "free shipping protection"
• You absorb if they don't claim

Approach 2: Optional at Checkout

• "Add package protection for $1.99"
• Customer chooses
• Revenue offsets insurance cost
• 30-40% of customers opt in

Approach 3: Free for VIP/Large Orders

• Include for orders over $100
• Part of premium experience
• Builds loyalty

Filing Insurance Claims

What You Need:

• Tracking number
• Proof of value (order invoice)
• Proof of damage (photos)
• Carrier delivery scan

USPS Claims Process:

File at usps.com/claims

Wait 7-10 days for review

Receive check or denial

Appeal if necessary

UPS Claims Process:

File at ups.com

Inspection may be required

7-14 day processing

Direct deposit or check

Atoship Claims Process:

Click "File Claim" in dashboard

Upload photos

We handle carrier communication

Paid within 5 business days

Reducing Insurance Costs

Tip 1: Insure at Actual Value Don't over-insure. A $50 item doesn't need $100 coverage.

Tip 2: Use Carrier Included Coverage USPS Priority includes $100—don't double-insure.

Tip 3: Package Better Proper packaging reduces damage claims:

• Double-wall boxes for heavy items
• Adequate cushioning (2" on all sides)
• "Fragile" labels where appropriate

Tip 4: Signature Confirmation For high-value items, signature confirmation prevents theft claims.

Insurance Strategy by Product Type

Building Insurance into Pricing

Example Calculation:

Product cost: $20
Selling price: $50
Gross margin: $30
Without insurance:
Expected loss (0.6% × $50): $0.30
Net margin: $29.70

With insurance ($0.80/package):
Insurance cost: $0.80
Expected claims: $0
Net margin: $29.20

Decision: Self-insure saves $0.50/package

Communicating Insurance to Customers

In Shipping Policy:

Package Protection:
All orders over $100 include complimentary shipping insurance.
For orders under $100, package protection is available at checkout.
If your package is lost or damaged:
Contact us within 7 days of expected delivery
We'll file a claim on your behalf
Replacement or refund issued promptly

Action Plan

Step 1: Calculate Your Risk

• Review last 90 days of losses/claims
• Calculate your actual loss rate

Step 2: Choose Your Strategy

• High-value? Always insure
• Low-value? Self-insure
• Mixed? Threshold-based

Step 3: Implement

• Set up insurance through Atoship or third-party
• Update policies
• Train customer service

Step 4: Monitor

• Track claims monthly
• Adjust strategy based on data

Get Started with Atoship Insurance

Atoship makes insurance simple:

• Free $100 coverage on qualifying shipments
• Cheap additional coverage
• Fast claims process
• Integrated with your shipping workflow

Create your free account and stop worrying about lost packages.