With many small businesses moving online, and many individuals starting to purchase more things on the internet, shipping insurance starts to become an important question. Should you insure your packages? Is it worth the cost to insure your packages?
To make matters worse, there are always the horror stories about shipping: lost packages, damaged good, etc. So, should you insure the packages you mail?
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Things to Consider
When it comes to offering and/or purchasing insurance, you should remember that millions of packages are shipped everyday safely, and very few actually get lost or damaged. Furthermore, proper packaging can prevent most damage from occurring to the actual item inside the package. The US Postal Service estimates, from their own research, that 1% to 2% of parcels shipped actually incur loss or damage. If you are a high volume shipper, this can add up quickly, but it may make less sense for someone who ships infrequently.
Shipping insurance can add up to 3% to the cost of shipping an item, so it is not a cost to take lightly. However, it is also important that, as an online reseller, you are responsible for the item to get to the buyer in the condition they ordered it – whether or not you charged for insurance. So, when making the decision to insure, keep this in mind.
Insurance Dos and Don’ts
If you do insure, make sure that you insure it for the full market value – not just what you sold it for. If something gets lost or damaged, the carrier will only reimburse you for actualy replacement costs, so you don’t want to under-insure, and there is no point in over-insuring, as they may dispute the value.
At a minimum, you should always insure items that are high-value, electronic or fragile, hard-to-find, or irreplaceable. The odds are in your favor that the item will arrive safe and sound, but with high dollar items, or fragile items, why take the risk?
Bottom Line
The bottom line is that is sometimes does make sense to insure your packages. If you are shipping high value or fragile items, you should insure them. If you are shipping cheaper commodity-like items, and you feel comfortable in covering any loss, then there is no reason to pay for insurance.
And remember, if a claim does need to be filed, it is up to the shipper to file it, and then refund the buyer. So, make sure that you keep all of your paperwork in order to facilitate a quick and easy claim.
About Carson Derrow
I’d like to point out that one does not have to buy insurance through their carrier. As you point out, it runs up to 3% of value and the claims processing varies amongst the carriers from reasonable to very slow. One option is to purchase one off package insurance online through licensed insurance agents such as U-PIC.com. I have used them in the past and their cost is at least half of what the carriers charge and I apply for coverage very fast. When I had a claim, I put the info together and they processed it within 10 days.