Shipping insurance is a service that protects packages from damage, theft, and loss during transit to help reduce the risks of shipping high-value or delicate items. Carriers may include insurance with certain shipping methods, or you can buy it separately from carriers or third-party providers.
If you’re a business with a high-risk shipping profile or have had bad luck with deliveries in the past, shipping insurance may be right for you.
In this article, we’ll explain how shipping insurance works, what it covers, how much it costs, and why it’s an important consideration for all shippers.
Key Takeaways
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Shipping insurance protects packages from loss, theft, or damage during transit.
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Different providers offer varying coverage costs and benefits, so consider the item value and destination when choosing insurance.
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Third-party shipping insurance often provides broader coverage compared to shipping carrier options, making it a cost-effective choice for businesses shipping valuable goods.
What Is Shipping Insurance?
Shipping insurance is designed to protect shippers from losses due to package theft, damage, or other delivery issues. It helps businesses minimize the financial risks of shipping high-value or fragile items that may break or get stolen before reaching the customer.
It’s also a great way to protect customer satisfaction. If customers know their shipment is protected, they’ll be more confident in placing the order – and in the case something does go wrong, you can afford to make it right without damaging your bottom line.
How Does Shipping Insurance Work?
Major carriers like USPS, FedEx, or UPS generally offer shipping insurance as part of certain shipping speeds and methods or as an add-on to your shipment. Third-party vendors may also provide their own insurance, with each option offering different benefits, coverage, and costs to consider.
Upon purchasing shipping insurance, you declare the item’s value and pay the appropriate cost for covering that value. If the package goes missing or gets damaged during transit, the insurer reimburses the declared value after an insurance claim process.
You’ll only receive reimbursement for the item’s declared value, so ensure you evaluate it accurately and choose the right coverage to avoid unexpected losses.
What Does Shipping Insurance Cover?
Shipping insurance is generally any carrier or crime-related shipping problems, but there are some exceptions.
Shipping insurance often covers:
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Stolen packages
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Packages lost in transit
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Weather or water damage
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Damage from incorrect handling
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Accidents
However, they usually won’t cover:
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Damage due to improper packaging or packing
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Prohibited goods like weapons
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Pre-existing damage
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Normal wear and tear from shipping, like scratches to the packaging
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Delivery delays (unless specified in your coverage)
The exact coverage you’ll receive depends on the insurance coverage you select and the carrier providing it, so make sure you understand what’s covered before you send it out.
How Much Is Shipping Insurance?
Shipping insurance costs depend on factors like the carrier and the declared value of the items. Carrier-provided insurance may be included in your shipping quote, but the insurance coverage is generally limited. For higher-value items, you can purchase additional insurance that covers a percentage of the declared value.
Here’s what you can expect to pay with different carrier options.
USPS Insurance Rates
USPS offers a straightforward insurance rate structure ranging from $50 to $5,000. Priority Mail Express and Priority Mail services include $100 of insurance in their cost, but additional coverage or coverage for non-priority mail starts at $2.50.
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Declared Value |
USPS Insurance Cost |
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$0.01 – $50.00 |
$2.50 |
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$50.01 – $100.00 |
$3.15 |
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$100.01 – $200.00 |
$4.15 |
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$200.01 – $300.00 |
$5.45 |
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$300.01 – $400.00 |
$6.85 |
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$400.01 – $500.00 |
$8.25 |
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$500.01 – $600.00 |
$11.00 |
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$600.01 – $5,000.00 |
$11 + $1.70 per $100 over $600 |
USPS is viable for moderately valuable shipments, but high-value items may need additional coverage.
FedEx Insurance Costs
Unlike USPS, FedEx doesn’t offer insurance. Instead, they provide declared value services that reimburse you for the lesser of repair costs, deprecated value, or replacement costs for damaged or lost products.
FedEx offers automatic $100 in declared value coverage for all packages, with extra charges for higher declared values.
|
Declared Value |
FedEx Declared Value Cost (2025) |
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$0.01 – $100.00 |
Free |
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$100.01 – $300.00 |
$4.20 |
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$300.01+ |
$3.90 + $1.40 for every $100 above $300 |
FedEx encourages shippers to use third-party insurers for their shipments to avoid losses related to limited coverage on declared value versus insurance.
UPS Insurance Costs
Like FedEx, UPS offers declared value services. Their shipments include $100 of coverage in their shipping rates, but additional coverage is available.
|
Declared Value |
UPS Declared Value Cost (2025) |
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$0.01 – $100.00 |
Free |
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$100.01 – $300.00 |
$4.85 |
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$300.01+ |
$4.85 + $1.60 for every $100 above $300 |
Third-Party Insurance Costs
Third-party insurance typically costs 0.5% to 4% of the item’s value, depending on the provider and level of coverage. In some cases, this coverage can be cheaper than carrier-provided insurance that often falls between 1-2% of the shipment’s value. Third-party insurance may also cover issues like porch piracy, which isn’t always covered by carrier insurance.
When to Purchase Shipping Insurance
In most cases, whether or not to buy shipping insurance comes down to the cost and fragility of the shipment. Shipping high-value or delicate items without insurance puts you at risk of a complete loss in case something goes wrong, in addition to an unhappy customer. Shipping internationally also increases the risk of loss or damage, making insurance more important for far-off deliveries.
For lower-value items, insurance costs might outweigh the benefits. Or, if you’re lucky, your carrier’s coverage will pay for the majority of any losses.
If you can’t afford to replace or refund the customer if something happens to the package, insurance is essential. If not, it’s a matter of balancing peace of mind and the insurance cost.
Carrier Insurance vs Third-Party Insurance
Third-party shipping insurance typically covers a broader array of risks compared to carrier insurance, which can provide you with more bang for your buck. If you ship with multiple carriers but use a third-party insurance provider, filing claims also becomes centralized and much easier thanks to a single point of contact.
In many cases, third-party shipping insurance is cheaper than carrier insurance or more comprehensive than declared value. While it might not always make sense to insure a package with UPS or FedEx, a third-party provider can make the decision much easier.
Is Shipping Insurance Worth It?
Whether shipping insurance is worth investing in depends on a variety of factors, including:
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The shipment’s declared value
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The insurance cost
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What’s covered
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The type of product you’re shipping
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The item’s fragility
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The destination location
You should also consider whether or not you can afford to refund or replace lost or damaged packages. If not, insurance can be the difference between a happy and unhappy customer.
Choose the Right Insurance for Your Needs
Shipping insurance is a valuable tool for protecting your shipments against loss, theft, and damage. It’s worth considering for valuable and fragile items, international shipments, and high-volume shipping, thanks to discounts, but you need to know what you’re getting.
Always weigh the cost against the item’s value and consider third-party insurers to make sure you save as much as possible. You should also make sure you understand exactly what’s covered to avoid any surprises.
At Zero Down, we offer shipping insurance that protects more and costs less. We make it easy to compare rates and coverage to find the best deal and act as your carrier concierge, saving you time and making sure your claims are processed quickly and correctly. Our solution also integrates with common e-commerce solutions and offers batch printing and fulfillment to streamline shipping and insurance handling.
Reach out today to learn how we can help provide peace of mind for you and your customers.
Frequently Asked Questions
What does shipping insurance cover?
Parcel shipping insurance covers lost packages, theft, and damage to items during transit, with some policies also including protection against delivery delays.
How much does shipping insurance cost?
Shipping insurance costs typically vary based on the carrier and the declared value of the items, generally calculated as a percentage of that value.
When should I purchase shipping insurance?
You should purchase shipping insurance for high-value, fragile, or international shipments, as these situations present a greater risk of loss or damage.
Is third-party shipping insurance better than carrier-provided insurance?
Third-party shipping insurance is generally better than carrier-provided insurance, as it often offers broader coverage and may be more cost-effective for high-value shipments.
