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Shipping insurance is an important topic for eCommerce businesses to understand. According to studies, around 1.7 million shipments are stolen or damaged daily. Without shipping insurance, the companies responsible for these packages would be unable to recover from such losses.
Coverage and costs can vary greatly, so it's important to know what options are available and how to best protect your products during transit. In this guide, we'll provide an overview of shipping insurance and outline the different types of coverage available
What Is Shipping Insurance?
Shipping insurance is a policy that a sender can purchase to insure their package against loss or damage during transit. Most shipping carriers offer some type of shipping insurance, and it is usually available for an additional fee.
Shipping insurance reimburses the sender for the cost of the package if it is lost or damaged during transit. It also typically covers reimbursements for the cost of postage and packing materials. Some policies even offer reimbursement for the value of the items being shipped, up to a certain limit.
Many companies offer shipping insurance, including carrier companies like UPS, FedEx, etc. The carrier companies shoulder the responsibility of the shipment to an extent when they transport it. The value of a consignment is covered under damages to a degree without additional costs. However, most eCommerce companies prefer using proper shipping insurance policies offered by insurance companies and not the partial coverage offered by carrier services.
How Much is Shipping Insurance
The cost of shipping insurance varies depending on the carrier and the value of the item being shipped. For example, UPS charges $2.70 for insuring a package worth up to $100, while FedEx charges $1.35 for insuring a package worth up to $100. USPS does not offer shipping insurance for packages.
When it comes to shipping insurance, there is no one-size-fits-all answer. The amount you'll need to insure your shipment for will depend on a number of factors, including the value of the items you're shipping, the shipping method you're using, and the country you're shipping to.
Here are a few tips to help you determine how much shipping insurance you need:
1. Know the value of your goods. This is the most important factor in determining how much shipping insurance you need. Be sure to include the cost of any repairs or replacements that may be needed.
2. Choose a reputable shipping company. Some companies offer better coverage than others. Read reviews and compare policies before choosing a shipping company.
3. Consider the shipping method you're using. Insurance rates will vary depending on whether you're shipping by air, land, or sea.
4. Know your destination country's customs regulations. Some countries have restrictions on what can be shipped into the country. Be sure to check with the customs office of your destination country before shipping anything.
5. Get quotes from multiple insurance companies. Rates can vary widely, so it's important to get quotes from several companies before choosing one.
Who Needs Shipping Insurance
Technically, shipping insurance can be taken by anyone and any institution. However, it is essential for people who run small eCommerce businesses and are involved in shipping packages from time to time. The shipping insurance sector has been growing over the years because most companies worldwide are invested in eCommerce today and operate on a large scale. From shipping raw materials to shipping finished products as orders, businesses are involved in shipping to a great extent.
Here are the organizations that invest more in shipping insurance policies and should opt for them. If your organization is like the ones described, you should also go for good shipping insurance that offers ample coverage to compensate for any accidental losses.
eCommerce Stores
eCommerce stores are mainly on the lookout for shipping insurance because eCommerce stores ship orders daily, and there is a lot of value attached to the goods. The whole eCommerce structure depends on the successful shipping and delivery of goods to destinations. Therefore, when shipping and delivery fail, eCommerce service providers need shipping insurance to fall back on and recover their losses. Every large-scale eCommerce company invests in a good insurance policy, and even small eCommerce businesses also do it. Moreover, in their initial days of business, small eCommerce businesses must invest in shipping insurance coverage.
Manufacturers And Distributors Of High Valued Products
Apart from eCommerce service companies, the direct manufacturers and distributors of high-valued and branded items also ask for a shipping insurance policy. The manufacturer has to send out a high volume of high-risk items to the distributors and dealerships; if shipping fails, there will be a lot of losses. To protect companies from losses after manufacturing and during shipping, insurance providers get the go-ahead to take an insurance policy to cover shipping.
Distributors also take up shipping insurance for the same reason too. High-value items are high potential items but also have high damage risks attached to them. Therefore, shipping insurance coverage is necessary for these goods and shipping processes. For the manufacturers, the shipping insurance is an additional precaution that manufacturers and distributors take against losses.
Businesses with International Shipments
This scenario is where the mode of transport and logistics, and distance come into play. The companies that rely on international shipping methods and carriers do ask for shipping insurance. The companies that depend on international shipments also rely on multiple logistics modes because the distance is vast. When the cargo is transported through a combination of methods, the risk of damage and loss to the shipment increases.
The risk of damage and loss is, of course, higher with international shipments when compared with domestic shipments. Therefore, companies that use international shipments for goods or raw materials often opt for a good insurance policy that extends shipping coverage. Since many companies today operate on a global scale, shipping insurance policies are popular among new-age companies.
Related: Cross Border Shipping Guide: Mistakes and Pitfalls to Avoid
Benefits Of Taking A Shipping Insurance Policy
1. Protection from financial losses
If your shipment is lost or damaged in transit, a shipping insurance policy can help to cover the cost of repairs or replacements. This could save you a considerable amount of money in the long run.
2. Peace of mind
Knowing that your shipment is properly insured can give you peace of mind when sending valuable or sensitive items by courier. This can help to put your mind at ease and allow you to focus on other important matters.
3. Enhanced customer satisfaction
If you regularly ship items to customers, taking out a shipping insurance policy could help to enhance their satisfaction levels. This is because they will know that their items are properly protected in the event of any problems during transit.
Related: How To Create The Best Shipping Experience?
4. Improved reputation
A shipping insurance policy can also help to improve your company’s reputation. This is because your customers will see that you are a responsible and reliable business that takes steps to protect their shipments.
5. Competitive advantage
In today’s competitive marketplace, any edge that you can give your business is worth considering. Shipping insurance can help to give you a competitive advantage by demonstrating your commitment to protecting your customers’ shipments.
Buyer Shipping Insurance vs. Seller Shipping Insurance
There are two major shipping insurance policies; you should know about both before opting. There is buyer shipping insurance and seller shipping insurance too. It all depends on the end of the shipping channel you stand at. For example, if you are also buying and you are not insured, you are exposing yourself to loss of money and property. Therefore, as a buyer also, you need shipping insurance. If you are an individual who buys from eCommerce companies regularly, you should consider signing up for shipping insurance policies.
Taking a buyers' insurance for shipping is often easy as you can opt for the insurance cover with a minimal additional cost added to your eCommerce order value. Many eCommerce service providers and companies offer this option to their registered users.
While buyer insurance in shipping terms is considered an option, seller insurance policy is more of a mandatory clause because the goods to be delivered are the sellers' responsibility until they are safely delivered. If the buyer gets damaged products, they can claim a refund or return from the seller. However, the loss is higher on the seller's side. Therefore, sellers need shipping insurance policies with high coverage. While the terms of both types of insurance policies may be a little different, the way they work are very similar. The party insured under the insurance policy will get a reimbursement every time a package or item is lost or damaged in mid of shipping.
The main difference in how the parties receive their insurance lies in how the losses are reimbursed. Usually, the buyer receives the reimbursement as a refund on the item damaged or not received. However, for the eCommerce company or the seller, the insurance provider is usually the shipping carrier company or a third-party insurance company that offers the coverage.
How To File A Claim With Shipping Insurance
If you need to file a claim with shipping insurance, there are a few steps you'll need to take.
Gather all Necessary Documentation
First, gather all of the documentation related to your shipment, including the original purchase receipt, invoices, and any other relevant paperwork. You'll also need to have the tracking information for your shipment handy.
Contact the Insurer
Next, contact the insurer and let them know that you need to file a claim. They will likely have a specific process that you'll need to follow, so be sure to ask about that and get all the details before proceeding. Once you have everything in order, submit your claim and wait for a decision. The insurer will investigate and determine whether or not they will cover the damages. If they approve your claim, they will issue a check for the covered amount.
Follow Up With the Carrier
Even if your claim is approved, it's a good idea to follow up with the shipping carrier to try and resolve the issue. In some cases, they may be willing to refund your shipping costs or offer some other form of compensation, even if they are not legally required to do so. If you're not satisfied with the response from the carrier, you can always file a complaint with the Better Business Bureau or another consumer protection agency.
These are the general steps you'll need to take in order to file a claim with shipping insurance. Remember to follow the specific process outlined by your insurer and always gather all the necessary documentation before proceeding. If you have any trouble, don't hesitate to reach out to customer service for assistance.
How To Choose The Right Shipping Insurance Policy
Whether you are going for a third-party insurance provider or for FedEx insurance rates, the insurance policy usually charges 1.5-4 percent of the total value of single shipments to cover total damages. The factors that decide the choice of shipping insurance are as follows-
The Insurance Coverage Provider
The cost and type of shipping insurance policy that you get depend on the insurance provider company. The rates and benefits extended by the insurance provider differ from one company to another. For example, UPS insurance rates vary significantly from other insurance policy rates.
Type of Goods
The shipping insurance policy and coverage that the company wants to secure also depends on the goods it ships. The shipping insurance policy differs for consumer goods, electricity, or medical equipment.
Mode of Transportation
The coverage and costs of the shipping insurance policy also differ on the mode of transport for the shipment. The modes of transport can be sea, air or even land. The type of coverage varies from one to the other method.
Related: USPS Lost My Package: What Do I Do?
Value of Goods
The shipping insurance matters when your company sends many valuable goods to customers. When the shipment is small, you might need a lesser insurance policy coverage for your goods. The insurance policy terms and benefits need to shift if the volume of goods sent through shipping increases. The shipping insurance benefits increase with the number of goods and value your company ships, but so do the shipping insurance rates.
Origin and Destination
The origin and destination of the packages also control the shipping insurance coverage as the distance affects the chances of damage risk. If the origin and destination locations are close to each other or at a significantly less distance, the coverage and benefits you need may not be that high.
However, if the packages go through the international shipping system, the insurance policies become very complicated, and you might need to get a high coverage insurance policy at high costs. The origin and destination of the packages also control the distance and the mode of transport for the shipping company. Therefore, the source and destination help you determine the factors on which the insurance process and its benefits depend.
Prior Insurance Claims History
The prior insurance claims history of the shipping company also controls the factors that go into deciding insurance policy for shipping processes. The insurance claims that are previously paid and the premium amount that your company has paid for previous policies make a lot of difference to the process of taking a shipping insurance policy in the future.
Conclusion
Shipping insurance is an important part of the shipping process, but it's not always necessary. By following our tips for reducing the chances of something going wrong with your shipment, you may be able to avoid paying for insurance altogether. If you do need to purchase shipping insurance, though, make sure you know what it covers and how much it costs. Simpl can help with all your fulfillment needs, so contact us today if you have any questions about shipping insurance or anything else related to fulfillment!
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