Customers expect their orders to arrive on time and in perfect condition. However, many factors that impact shipping are out of your control, such as poor weather conditions, too much demand on the carrier, or mistreatment of the package on the journey.

One solution is shipping insurance — but is it worth it? After all, you’ll be adding to your shipping expenses. However, when you don’t use insurance, your risk of losses are high if something does go wrong.

There are several reasons why insuring shipments is the right way to go for any company that is delivering products. Whether you’re a dedicated eCommerce business or shipping items is just one of the services you offer, there are numerous benefits to insuring your cargo.

5 Reasons Why You Need Parcel Shipping Insurance

1. Even the Best-Known Shipping Companies Fail 

For the most part, you can trust carriers like UPS and FedEx to deliver your packages on time, but even these companies fall short of a 100-percent success rate. In fact, during the holidays of 2013, FedEx only had an 83 percent on-time delivery rate. The remaining 17 percent of packages were either delayed or lost forever. With proper insurance, in these situations you can compensate buyers at no cost to your business. Of course, you can add on shipping insurance through USPS, however it can quickly get costly. When it comes to shipping insurance cost, you have a variety of options.

2. 1 in Every 10 Packages Arrives in Poor Condition 

Depending on the company you use to ship your products, anywhere between 7 and 11 percent of packages arrive in poor condition. Because of this, it’s important to protect your items for the sake of your business and its customers. 3. It Simplifies Shipping Internationally

It is difficult to branch out into new markets if you are unsure that you can trust the importing authority in another country. Every package needs to make it through customs, but careless or corrupt officials may prevent this from happening.

If your package does pass through customs, it still needs to reach the door of the customer. This is less of a problem if you are using an international shipping company but can still yield issues. Many times, national carriers contract with local 3rd party carriers to do the final delivery after customs clearance. However, if you are relying on the USPS, you will need to trust the local postal service to complete the job, and other international post offices are nowhere near as reliable as USPS. In either case, shipping  insurance can cover you for the entire journey. 

4. It Covers the Most Expensive Packages

When you mail a package, you automatically receive $100 of coverage. If something happens to a product worth more than $100, you are responsible for making up the difference to reimburse the buyer. With high value shipping insurance, on the other hand, you can insure items worth any amount, including extremely expensive products, at just a fraction of their value.

5. You’ll Have Peace of Mind

When you insure shipments, you never have to worry about your packages after you hand them over to the carrier. The buyer will receive the product on time and in perfect condition — or else receive compensation. In the case that anything goes awry, there will be no unexpected expenses for your business and no loss of valuable customers. Depending on who you insure with, some companies will insure for the amount invoiced, meaning that even if there is a loss, you still make the sale and profit you would have realized.

Types of Shipping Coverage

Carrier Shipping Insurance

Carrier insurance is provided directly through the shipping company. On the surface, this seems like the most obvious choice. After all, it is simple to acquire — you simply purchase the coverage when you pay for your shipping. However, carrier shipping insurance has a number of disadvantages.

For one thing, some carriers refuse to cover certain types of items. If your business sells precious metals, for instance, shipping insurance through UPS is already disqualified as an option. Plus, coverage may only extend to certain destinations — some international locations are never covered by carrier insurance.

Another limitation can be declared value. Some carriers give certain types of items a declared maximum value, no matter if the product is actually worth more. For example, if you are shipping plasma TVs with FedEx, the carrier will limit the declared value to $1,000.

Finally, claims can take a long time to process. You will always need to file a claim yourself, even if it is the fault of the carrier and the carrier is aware of the problem. Usually, you only have a limited number of weeks to file the claim. You’ll need to gather documentation to show that you shipped the package as well as finding proof of the value of the product, evidence of insurance, and proof of damage or loss. Through carriers, the first $100 will require filing a claim. Often times, convincing carriers to pay claims over $2,000 is difficult and you may be forced to accept a $100 check for the entirety of the package.

If the claim is for damage, the company may need to physically inspect the package. If the carrier decides that fault is with you for poor packaging, you will receive nothing. In the case of poor packaging, third party insurance companies often will not accept liability either, as the packaging responsibility is in the hands of the packager. In the case it is possible to repair the item, the carrier will only reimburse you the repair costs.

Carriers specialize in shipping and logistics processes involved with both domestic and international shipments. Insurance is simply an additional service that carriers offer, not something the companies specialize in. You will not receive the same level of protection and care from a carrier that you would from an insurance professional.

If you still want to consider carrier insurance, be prepared to read documentation closely. This will help you avoid surprises when the time comes to make a claim.

3rd Party Parcel Shipping Insurance 

An alternative to insuring with your carrier is insuring with a 3rd party broker. Although 3rd party insurance companies have no affiliation with carriers, they often integrate with your current shipping system. They also offer many advantages over carrier coverage and procedures.

Firstly, 3rd party providers tend to have  cheaper shipping insurance costs than carrier insurance (especially when there are no minimums or other fees). The providers also offer more flexibility for shipping packages internationally and higher declared values on a wider range of items.

A major advantage is the simpler claims processing procedure. Most will complete your claim, whether for damage or loss, in just one to two weeks. Plus, they usually require photographic evidence rather than in-person, physical proof.

Is Shipping Insurance Worth It?

There are a number of reasons why you should purchase insurance for your packages and almost none to dissuade you. To receive insurance for the full value of any item, avoid a lengthy claims period, and spend less, pick a 3rd party insurance provider like Cabrella. When you automate the process for all your orders, it requires no more effort than purchasing from a carrier, and you’ll receive all the benefits of parcel shipping insurance.