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How to Use Shipping Insurance for Small Business to Achieve eCommerce Success

July 10, 2025 / 5 minute read / By Nick Borowitz

The eCommerce landscape is a race, which means protecting shipments with insurance is not just smart, it’s an essential mechanism of business survival.

Retailers who ship orders or send merchandise to other retailers know the hassles of delivery. Orders can be damaged, stolen, lost, or disappear altogether.

But have you ever thought about what happens after the fact? What happens? Does the customer get their money back? Is the retailer reimbursed for the time spent chasing down what is lost?

In most cases, the loss is chalked up to a zero or someone gets pennies back on the dollars spent in the first place. This adversely hurts the retailer’s reputation because the receiving customer will inevitably blame the retailer, even though they’re equally not at fault.

That’s where shipping insurance comes in. We’ll break it down quickly and explain why retailers and customers benefit from using it!

Understanding the Fundamentals of Shipping Insurance Protection
Who Pays for Shipping Insurance and When is the Best Time for It?
Comparing Insurance Options for Carrier Coverage vs. Third-Party Coverage
The Business Case for Comprehensive Coverage
Making Insurance Work for Your Business Strategy

With package theft affecting 41% of Americans and shipping damage resulting in 85 million damaged packages arriving on doorsteps in the last 12 months, the risks to your business reputation and bottom line have never been higher.

Let’s jump in!

1. Understanding the Fundamentals of Shipping Insurance Protection

Shipping insurance can be thought of as a financial safety net. It protects packages during transit, covering losses due to damage, theft, or non-delivery.

Unlike the basic liability coverage that carriers like USPS, UPS, and FedEx provide (typically limited to $100), proper shipping insurance offers comprehensive protection for the full value of your goods.

This protection becomes critical for small- to medium-sized retailers when you consider that you are responsible for packages until they reach customers safely. A single lost or damaged high-value shipment can significantly impact your profit margins. In contrast, multiple incidents can damage customer trust and generate negative reviews that hurt future sales.

Learn More: Get Your Online Orders Out the Door Faster to Customers

2. Who Pays for Shipping Insurance and When is the Best Time for It?

The responsibility for shipping insurance depends entirely on who purchases the policy, and there are several scenarios to consider:

Retailer-Purchased Insurance:
When retailers opt to insure shipments, they pay the insurance premium. They may either absorb it as a business cost or include it in shipping charges. Many merchants automatically insure orders above certain thresholds (typically $200 or more) to protect their investment.

Customer-Purchased Insurance:
Customers can add insurance at checkout through merchant platforms or carrier plugins. This optional coverage gives buyers additional claim rights beyond standard carrier liability.

Dual Coverage Options:
Both retailers and customers can insure the same package, though policies don’t typically stack—claims must be filed with one insurer first.

Coverage Type	Who Pays	Coverage Amount	Typical Use Case
Carrier Default	Included in shipping	Up to $100	Low-value items
Retailer Policy	Business absorbs cost	Full product value	High-value orders
Customer Add-Ons	Customer pays premium	Variable coverage	Customer peace of mind
Third-party Insurance	Retail or customer	Full retail value	Cost-conscious businesses

Explore: U-PIC and Celerant Partner to Expand Shipping and Fulfillment Insurance Coverage

3. Comparing Insurance Options for Carrier Coverage vs. Third-Party Coverage

Traditional carrier insurance often proves costly and restrictive. Carrier-declared value coverage can cost $0.50 to $2.70 per $100 in value, with USPS insurance ranging from $2.75 to $12.25 for goods worth up to $600. These rates quickly add up, especially for businesses shipping multiple packages daily.

Third-party providers like U-PIC offer a compelling alternative, delivering the same robust coverage at 50% to 90% less than traditional carrier insurance. These solutions provide several key advantages:

Broader item acceptance: Coverage for jewelry, electronics, collectibles, and used goods that carriers often exclude
Faster claims processing: Online filing with resolution typically within 7-10 business days
Seamless integration: API connections with popular platforms like Shopify, ShipStation, and custom eCommerce systems
No hidden fees: Transparent pricing without long-term commitments
Comprehensive coverage: Protection for shipping costs, loss, damage, and theft

Explore: Learn About the Shipping Services that Celerant Partners With for Better Rates

4. The Business Case for Comprehensive Coverage

The financial impact of uninsured shipping losses extends far beyond the immediate product cost. Consider these factors:

Replacement costs: You’ll need to ship a replacement item, often expedited, doubling your shipping expenses
Customer service time: Staff hours spent managing complaints and processing replacements
Reputation damage: Negative reviews and decreased customer confidence affecting future sales
Cash flow impact: Immediate loss of both product and shipping revenue
Competitive disadvantage: Customers may choose competitors who offer insured shipping

These cumulative costs can devastate businesses shipping high-value items or operating on thin margins. Third-party insurance helps mitigate these risks while reducing overall shipping costs.

Pro Tip:

Retailers should promptly generate and send shipping details to their customers when the order is processed. When the shipping print slip prints, send the information to the customers. This demonstrates attention to detail, making customers feel safer in purchasing. Also, by having up-to-date information, retailers can show customers that they show equal interest in the order arriving at the customer’s door.

5. Making Insurance Work for Your Business Strategy

Implementing comprehensive shipping insurance requires strategic thinking about your customer base, product mix, and risk tolerance. Start by analyzing your shipping patterns—identify order values, destinations, and historical loss rates to determine where insurance provides the most significant value.

U-PIC’s technology-driven approach exemplifies how modern insurance solutions integrate seamlessly into existing workflows. Their “crawl, walk, run” methodology ensures quick implementation with minimal operational disruption. At the same time, their 30+ years of experience and partnerships with major carriers provide reliability you can trust.

Consider automation as a key factor in your insurance strategy. Manual policy purchases create bottlenecks and potential coverage gaps, while API integration ensures every qualifying shipment receives protection automatically. This approach reduces administrative burden and eliminates human error in the coverage process.

The combination of cost savings, broader coverage, and operational efficiency makes third-party shipping insurance an essential tool for growing businesses. By collaborating with proven providers like U-PIC, retailers can focus on core business growth while protecting their shipments and customer relationships.

Explore U-PIC

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