If your business ships products across country or overseas, what happens when one of those packages is lost, delayed, or damaged? As the seller, your customers are going to hold you accountable — even if it’s not the fault of your company.
One solution to this concern is shipping insurance. Shipping insurance is a service that holds shippers accountable for and protects your business against lost, stolen, or damaged packages. If an insured package is damaged or does not reach its destination, the retailer is reimbursed the declared value of the items in the package.
Shipping insurance means paying a small upfront fee, for the peace of mind that any mishaps in transit will not reflect poorly on your brand.
Your reputation is on the line.
A 2020 survey from industry expert, Convey, found that 47 percent of respondents said they’re unlikely to shop with a retailer again after a bad shipping experience.
A similar 2016 survey found that, in the case of delayed or damaged product:
- 53.1 percent of shoppers would expect a free, expedited replacement.
- 43.9 percent of shoppers would expect a refund or discount on shipping costs.
- 19.4 percent would expect a coupon discounting their next purchase.
Those numbers have likely shifted somewhat since stay at home orders led to an online retail boom, but the point remains. Your money and your business’s reputation are at stake when it comes to lost, delayed, or damaged shipments.
When do you need shipping insurance?
Shipping insurance isn’t necessary for the average person sending a parcel, unless that parcel is particularly valuable or fragile. However, in a business setting, it really depends on your frequency and volume. The more you ship, the higher the chances are of something going wrong. If your product is especially expensive, the risk increases.
If you’re doing any kind of ecommerce, shipping insurance is a necessary operating cost to protect your revenue and your reputation.
2021 shipping crises are the perfect reason to get shipping insurance.
In 2021, we have already seen one of the best motivators for investing in shipping insurance. In March, the Taiwanese container ship Ever Given became stuck in the Suez Canal, bringing global trade to a screeching halt for many industries. On May 25th, a chemical fire broke out on a container ship off the coast of Sri Lanka.
If you are shipping overseas, or even by land, there is always a possibility of an accident or disaster leading to product destruction or delay. The events of the first half of 2021 might make you pause and consider investing in shipping insurance, or reviewing your existing coverage.
Cost is a consideration.
Across all major carriers, the rates are determined by the value of the shipped item.
ShipBob provides a helpful overview of the price comparisons for UPS, Fedex, and USPS. Both Fedex and UPS offer free coverage for packages up to $100, with rates increasing from there. However, UPS has a $2.70 insurance minimum, so the value of the shipped product must be at least $300 to qualify for UPS shipping insurance.
If you’re using a different provider, be sure to do your research and see what options you can use to your advantage. Likewise, there are third-party shipping insurers that are often less expensive than the shippers themselves.
As with any business expense you take on, do your research and consult with industry experts.