I think you’ll agree with me when I say:

Receiving packages on-time and in perfect condition gives us a good feeling.  

Whether you’re the consumer receiving the package, or you’re a business sending shipments out, you want your delivery service to be of quality, taking care to safeguard and protect your precious cargo.

The thing is: that doesn’t always happen, and unfortunately, 11 million U.S. homeowners had packages stolen in 2016.

But there are ways to insure your packages and make sure your shipments are covered; here are the what, when, why, who, (and how) of shipping insurance...

What Is Shipping Insurance?

Shipping insurance is a service that reimburses the sender of a stolen, lost, damaged or pilfered package. This service can be used for a single package or on numerous packages in a shipment depending on size and is provided by a shipping carrier or third-party insurer. Insurance rates vary usually by commodity type and country of choice.

When sending a parcel by courier there is always the possibility that a shipment can be stolen, lost, or arrives damaged due to a variety of reasons.

The content could be very fragile, the packaging might have been insufficient or could have yielded during transport, or an operator may not have been careful in handling the package. Furthermore, in many cases, carrier representatives are opening packages and removing contents, then putting the package back in the stream of mail to be delivered to the destination or discarding it. Another frequent loss situation happens when companies delivering to residences use delivery confirmation only. Many times, carrier employees will simply mark something as delivered but take the package back; other times, neighbors or other people with access come by to steal packages from the recipient’s front steps.

As you can see, insuring domestic and international shipments is an indispensable practice when shipping material of a certain value.  It’s a relatively small premium to pay to protect yourself against the worst.

There are several categories of shipping insurance:

Parcel Insurance Plan

When sending a single package, a parcel insurance plan will protect the declared value of your shipment.  Usually carriers will automatically cover the first $100 of insurance for shipments. They then offer the option of purchasing additional insurance for packages with a higher declared value.  

But before you sign with a carrier, here’s the funny part:

Ironically, carrier prices tend to be 4 times higher, if not more, than a third-party insurer who actually has more specialized service and execution quality in terms of developing and carrying out parcel insurance plans. 3rd-party insurers also have fewer restrictions and much more streamlined claims practice.

Cargo Insurance Plan

This type of plan is for companies that have large, bulky, long-distance shipments to make. You generally see this for conveyances such as ocean cargo, air cargo or LTL Trucking where heavier and bulkier goods need to be delivered.  It comes as one of several varieties and policies and could have various features, valuation clauses, and other important details to look into such as:

All risk: All risk covers any damage caused by improper packaging, abandonment of the load, incorrectness of the employee and infestation. In fact, this type of coverage is called all risk but not all aspects of risks are covered, so be sure to specify coverage if and when you sign up for all risk insurance.

Named Perils: Coverage is limited to the exact wording in the policy.  Say for example, if your package is vandalized and there is nothing in the policy about vandalism, then you would not be covered.

Warehouse to Warehouse Coverage: Covers cargo in transit from the origin warehouse to the destination warehouse. Insuring cargo while being stored in a warehouse or anywhere outside that route must be bought separately.

None of the types of insurance listed guarantees one hundred percent coverage. And most of them provide limited liability coverage as part of the transport conditions.

You should also note that not all insurers will insure all types of goods.

General cargo are easy to insure items such as linen, fabric, construction parts, etc.  Target Cargo are hard to insure items that are of high-value, often fragile items like bottled liquor, cosmetics, electronics, furniture and more. Items that are typically excluded from coverage or require special deals include things like jewelry, art, bullion, tobacco products, computer chips, livestock, and precious metals.

When Is Shipping Insurance Absolutely Necessary?

It is highly recommended that you have a parcel insurance plan for anything that you don’t feel you can afford to replace if it gets lost, stolen, or damaged.

For many businesses, building in the cost of a parcel insurance plan into pricing is a good way to go. Other companies have the ability to even earn and generate revenue on these costs by marking up insurance costs.

Having a parcel insurance plan is useful no matter how expensive your goods are.  But there are some scenarios where this becomes especially crucial.

• Shipments of high value are often required to have coverage to protect all parties involved in the possibility of losing big.
• Fragile non-disposable things should be insured since they’re especially susceptible to damage from mishandling.
• Risky shipments, like to certain countries or during certain seasons.

Just one loss can be a major expense for an individual or small business! And even worse, businesses’ reputations could take a hit when they have unhappy customers.

Not only do you have to replace what got lost/stolen/damaged, but then you have to pay to ship it again, too.

Shipping insurance will protect against all kinds of risky events, including damage from transport vehicle accident/collision, fires, floods, earthquakes, hurricanes, shipping vessel sinkage, or just loss of package.

Why Do You Need Shipping Insurance for These Scenarios?

Every year, between $12 and $15 billions worth of goods are lost or stolen during the shipment process, and over $100 billion of goods are mishandled or damaged.

Packages are often handled by multiple parties, especially during an international shipment.  Private carriers typically subcontract the final step in the delivery process to local couriers in the destination country, especially when the countries are remote or risky.  This causes a loss in control for the original carrier.  

But here’s something worse:

When post offices are handling international shipments, say for example USPS, the post office will hand packages over to the destination country’s post office.  Depending on the country, these offices can be unorganized, difficult to track, and potentially risky to rely on.

Insuring your items against all these unfortunate possibilities makes sense if you’re shipping to a risky area, sending something very expensive, or sending anything internationally in general.  It’s also a good idea if you’re sending frequent or regular shipments to a customer. Having on-time and intact deliveries helps you build a great reputation with customers.

By neglecting to insure your shipments, you risk losing the entire value.  Insuring against mishap is one of the best ways to protect yourself from all the possible ways that having a package delivered can ultimately go wrong.

Who Provides the Best Shipping Insurance?

Shipping companies and the postal service offer insurance to all their customers, but their policies don’t always give you the best value or the best coverage.  Typically people or companies will insure with whoever seems like the easiest option, which is, more often than not, their carrier.  As you might have guessed, however, carriers are not always the best choice in terms of price, flexibility, reliability, and filing claims.

If compared, third-party insurance will normally be used to provide fuller coverage. Carriers will typically charge 85 cents for every $100 of insurance and third-party companies charge about 55 cents for every $100. But with Cabrella, insurance rates can be up to 90% less than the rates of the common carriers with rates as low as 10 cents for high volume shippers.

The following is a comparison between Cabrella and the United States Postal Service. The savings is clear compared to USPS parcel insurance rates. Cabrella provides a free online savings calculator to give you the specific amount you can save on your shipments.

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$600 insurance USPS = $9.15

$600 insurance Cabrella = $1.50

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50 packages x $9.15 USPS = $457.50

50 packages x $1.50 Cabrella = $75.00

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200 packages/ month USPS = $1,830.00

200 packages/ month Cabrella = $300.00

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$1,830.00– $300.00 = $1,530.00 savings/ month

$1,530.00 savings/month x 12 months = $18,360.00 SAVINGS/YEAR

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How Can You Insure Your Packages?

The best shipping insurance providers offer good insurance rates and customized solutions.  Switch to a parcel insurance plan that fully integrates with your existing shipment methods and saves you money every time you ship.