Key Points:

  • One study found that 7 in 10 customers are unlikely to shop from an online retailer after a poor delivery experience
  • Recent studies show that most customers expect merchants to foot the bill for expedited shipping to replace a lost or delayed shipment
  • Easyship’s data shows that 7 in 10 online shoppers add shipping insurance when offered by the merchant

We’ve all had a package lost, stolen, or damaged in transit. A bungled delivery can be the fault of the courier, the merchant, a thief, or just plain bad luck. But with rates of delivery error estimated at 10% and rising, you may want to take steps to mitigate mishaps.

Shipping insurance is a product offered by shipping couriers and third parties to protect against lost, damaged, or stolen packages. If your shipment goes amiss, you get reimbursed based on the declared value of the items for just pennies on the dollar.

One study found that 7 in 10 customers are unlikely to shop from an online retailer after a poor delivery experience. If only there were a way you could safeguard your packages, profit margins, and brand reputation all at once...

Use this blog to learn if you benefit from shipping insurance, how to file a USPS insurance claim, and more.

Table of Contents

What is Shipping Insurance?

Shipping insurance is a service that can reimburse shippers and recipients whose packages are lost, damaged, or stolen in transit. The aim is to provide peace of mind around shipping.

Many courier services include a small amount of insurance coverage at no charge. For example, all USPS Priority Mail Express shipments are covered up to $100. You can purchase extra insurance from the courier or from third-party providers if the included coverage is inadequate, or lacking entirely.

Insuring a Package

Say that USPS loses a $150 pair of shoes you’ve shipped with USPS Priority Mail Express. You’re automatically covered for $100 of the item value because you used USPS Priority Mail Express. You can file a USPS claim to get compensated – but only up to the maximum liability amount of $100.

Maximum liability is insurance-speak for the amount you get paid if something goes wrong. If you paid for extra coverage, though, you can get reimbursed for the total declared value of the shoes.

The payout cap varies for each courier service. For example, FedEx Same-Day Air has maximum liability coverage of $2,000. Each courier also sets certain restrictions, while certain claims don’t get paid out due to a lack of evidence. This means it’s important to read the fine print of your USPS, UPS, and FedEx claim policy.

Alternatively, you can buy shipping insurance from third-party insurers that typically have higher liability amounts, greater coverage, and faster payout schedules.

Who Uses Shipping Insurance?

Historically, shipping insurance was used by merchants to mitigate their risk on high-value shipments. But in the age of eCommerce, shipping experiences are a customer priority with some strings attached. Without insurance, you may end up holding the bill for shipment issues outside your control.

Recent studies show that most customers expect merchants to foot the bill for expedited shipping to replace a lost or delayed shipment. 44% say they want a refund on shipping costs. Rather than forfeit the profit on shipments gone awry (at no fault of yours), you can sidestep the risk for a couple of extra bucks.

In recent years, online shoppers have also gained a taste for package protection. The reasons for this are the 4 in 10 shipments that end in porch piracy, but also elevated rates of package loss since the pandemic. Given the low cost of insurance on most items, many shoppers would rather pay extra for protection and file a USPS or other courier claim to get their money back.

Easyship’s data shows that 7 in 10 online shoppers add shipping insurance when offered by the merchant. This suggests that merchants who offer shipping insurance can boost conversion rates by offering buyers the option to add shipping insurance. Buyers who are more confident in a successful delivery are more likely to convert.

When is Shipping Insurance Worth It?

Shipping insurance is cost-effective if the cost to fix all delivery mishaps is less than what you paid for all your policies. To calculate, compare your delivery error rate to the costs to insure shipments. Be sure to account for the item value and the price of replacement shipping. In the end, it comes down to your unique business, product values, and desired profit margins.

As a rule of thumb, though, it’s smart to ensure high-value shipments. In fact, retailers often build the cost of shipping insurance into the price of their high-value items. After all, buyers won’t bat an eye if their diamond ring costs $3 more. But if your shipment goes AWOL, those few bucks can save your bottom line.

Automating Your Shipping Insurance

With Easyship, you can create rule-based preferences that add shipping insurance to orders above a certain value threshold. Below is the Shipping Rules feature for merchants that lets you assign insurance to orders that meet certain criteria.

Easyship Shipping Rules Feature for Merchants

You can create a rule where all orders over $100 automatically add insurance. This is a common solution for sellers who only want to insure shipments over a certain price. This way, you know you’re shipping cost-effectively and getting the protection you want at once.

Insurance at Checkout

You can also let customers add insurance to orders in the cart with a feature called Insurance at Checkout. With Insurance at Checkout, customers get the option to add total coverage to their order right in the cart. Insurance rates are pre-calculated to each order and start at just 98¢, and customers pay for coverage.

Below is the Keyboardio cart flow with Insurance at Checkout displaying the real-time option for package protection.

Shipping Protection Feature

Insurance at Checkout is the best of both worlds – you get to protect packages without paying for it.

The Costs of Shipping Insurance

Carriers base the rates for shipping insurance on the declared value of the shipped item, plus a minimum base fee of $2-3. In general, you can estimate the costs of insurance as 1% of the shipment value. That said, each provider charges for insurance slightly differently.

USPS Shipping Insurance Costs

Below are the insurance rates from USPS as of August 2021.

Amount for Merchandise Insurance Coverage

USPS charges a base fee of $2.30 per shipment, then around $1 for each additional value threshold. The maximum liability coverage USPS offers is $5,000. This means you can’t get compensated for more than $5,000 when you file a USPS insurance claim.

Bonus: All USPS Priority Mail Express services include free insurance up to $100. Plus, all USPS Priority Mail services include free shipping up to $50.

FedEx Shipping Insurance

FedEx is clear on this: they don’t offer shipping insurance. Instead, you can get covered for the declared value of your item. Effectively, though, it’s the same thing.

As mentioned above, FedEx “insures” the first $100 of declared value on all orders for free. Shipments valued at $100-$300 incur a $3.45 fee, and each $100 after that is another dollar. So to cover a $1,000 item, you’ll pay $3.45+(7*10) = $10.45.

Declared Value Definition

FedEx services vary in their maximum declared value coverage, as listed below:

  • FedEx 1 Day (Overnight), 2 Day, 3 Day: $50,000 per shipment
  • FedEx Ground, FedEx SameDay: $2,000 per shipment
  • FedEx Envelope, FedEx Pak: $500 per shipment

UPS Shipping Insurance

Like FedEx, UPS automatically covers the first $100 of declared value for all its shipments. It also stresses that this declared value coverage isn’t technically insurance. If you need more liability coverage, it can be purchased via UPS’s third-party insurer.

As shown below, UPS charges the same $3.45 base fee for coverage on shipments valued above $100, with an incremental increase of $1.15 per $100 of liability coverage.

Declared Value for Carriage Shipping Insurance

Maximum declared value coverage for UPS varies by service but includes more restrictions than FedEx. These restrictions are independent of any restrictions from UPS’s insurance provider.

  • Packages shipped from a UPS Store with a UPS account number: $50,000 per shipment
  • Shipments using UPS Internet Shipping: $5,000 per shipment
  • Returned packages: $1,000 per shipment
  • Packages shipped via third-party retailer: $1,000 per package
  • Package shipped via UPS Drop Box: $500 per shipment
  • International shipments containing jewelry: $500 per shipment

How to File a Shipping Insurance Claim

Whether it’s you or a customer that files for reimbursement, the claims experience will vary slightly by courier. Regardless, the first step is to submit the required claims paperwork to the courier or their provider via an online portal. Required claims paperwork includes but may not be limited to:

  • Proof of value: a receipt or product listing confirming the item’s retail value
  • Proof of shipment: be prepared to provide your shipment details
  • Proof of problem: providers ask for photo evidence of any loss, damage or theft


Make sure to submit any claims before the cutoff. The cutoff is typically within 21 calendar days of the original shipment for express services. Economy shipping services often allow up to 60 days for submission. In the case of lost packages, you typically get 60 days to submit a claim. These timelines can vary by courier and provider – so be sure to read the fine print to avoid disappointment.


Once you submit your claim online, you can expect an approved claim to be paid in 1-2 weeks. Not all claims get paid, however, just like regular insurance. Since couriers are incentivized to not pay claims, many merchants prefer to use third-party shipping insurance instead.

Package Ready to Be Insured

Easyship offers third-party shipping insurance from InsureShip up to $10,000 on almost all shipments. InsureShip is a top-rated provider that pays claims in just 5-7 business days, making it the fastest payout on the market.

For merchants, fast payouts are vital to retaining customers when delivery gets messed up. Easyship just launched our new, blazing-fast insurance claims portal as well. This means you or customers can file a claim in literally two minutes – and get paid out in record time to boot.

Shipping Insurance for Peace of Mind and Profit

Sometimes you want coverage for precious items. Sometimes your customers would feel more secure if insurance was on the table, and are willing to pay for it. Or maybe you give buyers total peace of mind and insure all shipments. Whatever the case, shipping insurance is a valuable feature to include in your eCommerce experience. Take a look at our shipping insurance page to find out more.

Want to automate your package protection in checkout with Easyship? Create a free Easyship account. You’ll get access to our features for your first 50 shipments per month  – free – and access discounted shipping rates up to 89% off for UPS, USPS, FedEx, and hundreds more couriers.