When operating a retail business—whether you’re selling specialty or wholesale products—it’s vital that you ensure that your product makes it to its destination safely. While this typically involves logistics like finding a dropshipping solution you can trust, shipping insurance can also protect you and your shipper against lost, stolen, or damaged packages. 

That said, shipping insurance may not be for every business.

In this guide, we’ll dive into all you need to know about shipping insurance for businesses—from why it’s important to how to find the right insurance for your company.

What is Shipping Insurance?

What is shipping insurance? Shipping insurance is a type of insurance that protects the orders that you ship. In most cases, shipping insurance covers the following:

  • Lost merchandise
  • Stolen merchandise
  • Damaged merchandise

When your business buys shipping insurance, you’re buying a layer of protection. Given the complexity of modern logistics, packages are bound to get lost, stolen, and/or damaged. 

With shipping insurance, your company doesn’t have to incur the costs of replacing these orders. Nor does it have to incur another cost—a disgruntled customer. With shipping insurance coverage for a package, you’re protecting your relationship and business with your customers as well as avoiding costs for a missing or damaged parcel. 

How Shipping Insurance Works

Whether it’s international shipping insurance or domestic, shipping insurance protects you as a business. When your business has shipping insurance, you, as the shipper, are reimbursed for any lost, stolen, or damaged packages. 

Most carriers have a scaffolded shipping insurance policy based on the value of goods shipped. This means that some carriers will insure items at no charge as long as the items fall beneath a certain value.

That said, some carriers will charge a fee no matter the value of the contents. In general, the higher the content’s value, the higher the insurance fee.

Let’s look at the insurance fees for several major carriers:1

  • UPS – For goods under $100, UPS charges no extra fees. After $100, UPS charges $1.05 per extra $100.
  • FedEx – For goods under $100, FedEx charges no extra fees. After $100, FedEx charges additional fees.
  • USPS – Unless you choose USPS Express mail, you can expect to pay fees regardless of the content’s value. For items $0-50, for instance, you can expect to pay $1.65.

Most shipping insurance is initiated with a claim. Customers usually have a set number of business days to file a claim for goods that are either lost, stolen, or damaged. Once the claim is processed and verified, the customer is remunerated at no cost to the business.

What Are My Options?

Your business can benefit from three main types of shipping insurance:

  • Major carriers – As stated above, most major carriers will provide insurance free of charge as long as the value of goods doesn’t exceed a $100 limit.
  • Freight forwarders – Freight forwarders are good for high-value items. Any items that are lost, stolen, or damaged are covered by the freight forwarder.
  • Third-parties – Some companies, such as Route, specialize in shipping insurance. These companies will cover the whole cost of replacing goods. Route shipping insurance, in general, is a more efficient and modernized way http://routeto protect you and your customers and provides an easy insurance claim process. 

In general, it’s beneficial for most businesses to have shipping insurance. That said, the type of shipping insurance will vary based on your shipping analytics.

Why Shipping Insurance Matters

Unless you’re only shipping products under $100 through major carriers, chances are you’ll greatly benefit from shipping insurance. Here are a few reasons why shipping insurance is a worthwhile investment:

  • Saves you money – The cost of replacing lost, stolen, or damaged goods can hurt a business—especially if you’re shipping high-value goods. Shipping insurance takes care of these costs and protects you against unforeseeable circumstances. 
  • Improved customer satisfaction – Many shipping insurance companies feature trackers that show customers exactly where their orders are. What’s more, they also can keep customers engaged through promotions and branded content. These strategies give customers peace of mind.
  • Provides data and insights – Some shipping insurance apps go beyond simply processing claims. They also provide you with analytics that can help you avoid problems in the future. This data can include information about types of claims, locations of frequent claims, and common merchandise.

For most businesses, shipping insurance matters. However, how do you find the one that is right for you and your business?

Finding the Right Shipping Insurance

Additional shipping insurance beyond what a carrier offers is essential to a business, especially one that ships items of high value. However, shipping insurance isn’t a one-size-fits-all model. While some businesses may find shipping through a major carrier to be the right move, other businesses need the total protection provided by a third-party app.

Let’s break down a few factors that you should consider when deciding on shipping insurance:2

  • Value of goods – As stated above, most major carriers will cover goods valued at less than $100. You’ll have to pay extra for goods valued higher than that. If your business routinely ships high-value items, it’s best to use a freight forwarder or third-party app.
  • Destination – If you’re shipping primarily within the continental U.S., you might be able to get away with a major carrier’s included insurance. However, if you’re shipping internationally, you’ll want the tracking capabilities of a third-party app.
  • Time frame – Most customers expect issues to be resolved promptly. However, some major carriers take days or even weeks to resolve an issue. Third-party apps like Route resolve issues much quicker—often within 24 hours of verifying the claim. If customer service is a priority, consider going third-party.

Ship Smartly and Confidently With The Right Provider

For most businesses, shipping insurance is a must, whether they’re using a major carrier, freight forwarder, or third-party shipping app. Finding the right insurance provider or insurance option beyond the minimum UPS, FedEx, or USPS insurance coverage can make all the difference for a business. 

That said, shipping insurance can only give you so much peace of mind. For maximum security, you need the right provider. 

Look for an insurance provider that provides your business a range of shipping data—from how to best negotiate carrier rates to logistics strategies designed to save you money.

Start shipping smarter, today. 



  1. OnlineLabels.com. What Is Shipping Insurance And Does My Business Need It? https://www.onlinelabels.com/articles/small-business-shipping-insurance
  2. Shift4Shop. The Basics of Shipping Insurance for eCommerce. https://blog.shift4shop.com/shipping-insurance-basics