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Is Shipping Insurance a Waste of Money?

July 11, 2025 / 8 minute read / By Zoya Naeem

Is shipping insurance worth it, or just another line item on your budget? This guide breaks it all down for you.

Damaged packages, delayed deliveries, and lost-in-transit orders are more common than most retailers would like. In fact, more than 1 in 10 packages face some form of shipping issue. And when that happens, it’s not the carrier your customers turn to. It’s you.

That’s why shipping insurance isn’t just about protecting boxes in transit, it’s about protecting your business from refund requests, customer churn, and operational slowdowns.

But how do you know if it’s worth it for your store?

And if so, what’s the right type of coverage to use, and when?

In this article, we’ll walk you through:

What Are The Benefits For Retailers of Having Shipping Insurance
When Do You Actually Need It
How Does Shipping Insurance Work For Online Retailers?
Types Of Shipping Insurance You Will Run Into
How Product Types Can Guide Shipping Insurance Decisions
Some Additional Factors Retailers Need To Consider
How Celerant’s Built-In U‑PIC Integration Simplifies The Entire Process

What are the Benefits for Retailers of Having Shipping Insurance?

When a package goes missing or arrives damaged, it’s not just the customer who’s frustrated. It’s the retailer who ends up covering the cost, whether that’s in refunds, replacements, or rushed follow-up support.

Shipping insurance helps protect your business from the fallout.

And for many retailers, it’s a smart way to reduce risk while improving the customer experience.

Here’s what it can do for you:

Protect profit margins by offsetting the cost of refunding or reshipping lost/damaged items
Improve customer retention, especially during post-holiday returns or high-volume periods
Cut down internal friction, giving your staff fewer claims to chase and fewer angry tickets to manage

Pro Tip:

Retailers that use a platform with integrated shipping insurance, like Celerant, can take post-purchase support one step further. With automation built in, claims can be submitted in just a few clicks, and reimbursement is typically processed within 7–10 days. That means fewer touchpoints, less downtime, and a faster resolution for both your team and your customer.

For instance, let’s assume a customer receives a broken item and reaches out the same day. With shipping insurance built into your eCommerce checkout, your team files a claim right from the order dashboard (no external portals). The reimbursement comes in days, not weeks, and your customer walks away impressed (and likely to return).

When Do You Actually Need It?

Shipping insurance isn’t something you need for every order, but there are certain situations where skipping it could come back to bite. The key is knowing when the risk outweighs the cost of coverage.

You want to start by looking at thing like:

Product value
Higher-ticket items mean bigger refunds if something goes wrong.

Fragility
Items that are prone to damage in transit (think: ceramics, electronics, glassware).

Shipping destination
Remote locations, high-theft zones, or international deliveries often carry added risk.

For example, sending a $12 notebook across town? You can probably skip the coverage. But if you’re shipping a $180 personalized gift set across the country during peak season, that’s a different equation. One mishap could mean a refund, a remake, and a customer you might not get back.

Custom products, limited-edition drops, and bulk orders also increase your exposure. If the item can’t easily be restocked or replaced, or if it would cut into your margins to do so, it’s worth protecting.

Here’s a quick checklist to help you decide when shipping insurance makes sense:

The item is expensive or high-margin
It’s fragile or easily damaged in transit
It’s a one-of-a-kind or personalized product
You’re shipping internationally
You’re in a peak volume period (like Q4 or a major promotion)
You offer free returns or replacements (meaning you absorb the loss)

How Does Shipping Insurance Work for Online Retailers?

Once you decide shipping insurance makes sense for a given order, the next question is -how does it actually work behind the scenes?

The process is pretty straightforward.

When a customer reports that their package was lost, damaged, or stolen, a claim is filed with the insurer. The insurer reviews the details, including tracking info, order data, proof of damage, and, if approved, issues a reimbursement. The timeline can vary, but with third-party providers like U‑PIC, most claims are processed in about 7–10 business days.

While the process itself may sound simple, what really matters is how well it is integrated into your operations.

If you’re manually jumping between shipping platforms, emailing documents, or updating spreadsheets just to track a single claim, that’s time you’re not spending on fulfillment or customer experience. And if you’re dealing with dozens (or hundreds) of claims during peak season? That overhead adds up fast.

This is where an all-in-one retail platform like Celerant steps in.

With built-in U‑PIC integration, you don’t need to toggle between portals or re-enter shipment details. Claims can be submitted directly from your retail system, and everything is tracked in one place, from claim submission to resolution.

Learn More About Celerant’s New U‑PIC Integration and How It Helps Protect Your Shipments at a Fraction of the Cost.

Types of Shipping Insurance You Will Run Into

You know the value of having shipping insurance and how it works, but what kind of insurance makes the most sense for your retail business?

Broadly speaking, there are three options:

Carrier Insurance
This is the default offered by shipping carriers like UPS, FedEx, or USPS. You pay a declared value fee per shipment to get basic coverage.
Third-Party Insurance
Providers like U-PIC specialize in eCommerce shipping protection, offering broader coverage at lower rates.
Self-Insurance
Some retailers choose to absorb the cost of lost or damaged goods internally. While this might work at low volume or low value, it becomes risky fast as order sizes or complexity grow.

To help you get a better idea, here’s how carrier insurance compares to U-PIC:

Feature	Carrier Insurance (UPS, FedEx, etc.)	U-PIC Insurance
Cost	Higher declared value fees (often 90¢ to $1.20 per $100)	Lower rates (as low as 50¢ per $100)
Claims Process	Manual and time-consuming	Online and faster (avg. 7 to 10 days)
Coverage Limits	More exclusions, sometimes unclear	Transparent coverage for more shipment types
Flexibility	Tied to that specific carrier only	Covers all major carriers
Integration with Platform	Not available	Integrated directly into Celerant

It’s easy to see why more retailers are leaning into third-party options. Not only is U-PIC more affordable (saving between 50% to 90% compared to most carrier options), it’s also designed specifically for eCommerce.

How Product Types Can Guide Shipping Insurance Decisions

Not every product in your catalog needs shipping insurance, but some absolutely do.

The trick is knowing the difference, and that starts with understanding your own SKUs by risk and value.

Let’s say you sell both high-end electronics and lifestyle accessories. A $300 drone lost in transit? That’s a margin hit and a frustrated customer. A $20 tote bag, on the other hand, might not warrant the same level of protection. Multiply that by volume, and the impact compounds.

That’s why smart retailers segment their products into tiers based on:

Item value
The higher the dollar amount, the higher the risk if something goes wrong.
Fragility
Delicate items (glassware, tech, perishables) are more likely to be damaged in transit.
Custom or one-off items
If it can’t easily be replaced or restocked, it’s worth protecting.
Shipping distance
International and long-haul shipments are naturally riskier and often require additional handling.

If refunding or reshipping a product would seriously impact your margins or worse, upset a loyal customer, it’s a sign that insurance is the right move.

Discover SKU Best Practices Every Retailer Needs to Know

Additional Factors Retailers Need to Consider

In order to build a smart shipping insurance strategy, you also need to look at the broader context of how, when, and where you’re shipping.

Some zip codes are more unpredictable than others. Whether it’s due to theft-prone apartment buildings, rural areas where deliveries sit unattended, or high-risk zones with inconsistent tracking updates, geography matters. Retailers shipping to those regions often benefit from insurance simply because the likelihood of something going wrong is higher.

Timing plays a big role too.
Peak seasons like Q4, Black Friday, Cyber Monday, and back-to-school promos can bring more orders.

Increased carrier strain, weather-related delays, and warehouse bottlenecks all contribute to a higher volume of claims. When every minute counts and every refund stings, coverage becomes a proactive cost saver.

Then there’s your business model. If you offer free returns or same-day reships as part of your customer experience promise, you’re already shouldering more of the risk. Insurance can help offset those costs and keep that premium experience sustainable, even when something goes off track.

How Celerant’s Built-In U-PIC Integration Simplifies the Entire Process

Shipping protection should feel like a natural part of running your business well, and that’s exactly what Celerant’s integration with U-PIC is built for.

With U-PIC now baked directly into Celerant’s eCommerce platform, retailers can offer smarter shipping insurance right at checkout. That means your customers get peace of mind with just one click (no juggling third-party portals), no complicated forms, and no disruption to your existing fulfillment workflow.

And the best part?

This partnership solves one of the biggest pain points retailers have with traditional coverage. As Jordan Parr, Director of Partnerships and Integrations at U-PIC, explains: “Carrier insurance is expensive, slow, and complicated. U-PIC gives our clients a faster, smarter way to protect what they ship, without breaking the budget.”

Here’s how Celerant + U-PIC makes shipping protection effortless:

Insure Shipments Across All Carriers
Cover every package you send via USPS, UPS, FedEx, DHL, and more, all through one unified system.
Bring Down Insurance Costs
U-PIC’s rates are significantly lower than standard carrier options, saving you 50% to 90% on shipping protection without compromising coverage.
Simplify Claims Processing
File claims online in minutes and get reimbursed in 7–10 business days on average, keeping your customers happy and your team unburdened.
Automate Coverage Reporting
Because U-PIC is fully embedded into the Celerant platform, there’s no need for manual uploads or external systems. Just ship, protect, and move forward.
Boost Customer Confidence
Customers feel safer knowing their orders are protected, and even more loyal when issues are handled quickly and without friction.

So, whether you’re looking to reduce refund losses, speed up post-sale operations, or just make your shipping process smoother overall, this integration helps you do it all faster, smarter, and more cost-effectively.

Get U-PIC Integration Today!

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