Insurance. It sounds easy, right? Especially since many carriers include insurance protection up to a certain amount. That’s what most people think until an item is lost or damaged and they have to file a claim. That’s when they wish they had researched insurance a little more from the get-go. After all, your business is about growing revenues and lost, stolen or damaged shipments eat at the bottom line. If you know your insurance coverage in advance, you’ll be much happier when (if) you ever have to file a claim.
Shipping insurance comes in two flavors: Cargo Insurance and Declared Value. They are night-and-day different from each other. Here are five questions you must ask yourself about insurance, so that you make sure you’re getting protection you need:
- What type of coverage are you getting? Is it declared value or cargo insurance? This chart will help explain the difference. Declared value is included by most major shipping carriers at up to $50 or $100 of value. With this insurance coverage, the shipper must prove the carrier’s negligence directly resulted in the loss or damage to the shipment. Alternatively, cargo insurance (true insurance) pays regardless of if the loss or damage was due to the carrier’s negligence, and is regulated.
- Who are you getting your insurance from? Is it a carrier or a third-party? Getting insurance from a carrier may seem the easiest, but third-party insurance is generally less expensive and provides fuller coverage.
- How much should I insure packages for? Insure items for what they are worth in retail channels, or what is most likely to be spent to replace it. If you ever have to file a claim, you are unlikely to get more insurance compensation for the item than its current retail value, so do not pay any additional fees that result from higher insurance values.
- How much do I have to pay to insure a package? Getting insurance from a carrier may seem the easiest, but third-party insurance is generally less expensive and provides fuller coverage. While carriers charge about $0.85 cents for every $100 of insurance (with a $2.55 minimum), third-party companies charge about $0.55 cents for every $100 (with no minimum). For example, ShipWorks Insurance (managed by InsureShip) will charge as little as $0.55 cents for a package insured at $100, whereas UPS and FedEx have $2.55 minimums for the same package.
- How do I file a claim? Start your claim as soon as you realize a package is damaged, lost or stolen. Carriers and third-party insurance companies have different cutoff times for filing, so make sure you file soon so that you don’t miss the allotted window.