Should you buy shipping insurance?

When you’re shipping high value items or large quantities of goods, you’ll naturally want to be protected if things go wrong. In the same way we insure our cards, houses, and mobile phones, shipping insurance provides us with some financial protection should shipping issues arise that aren’t within our control.

Whether you’re shipping goods nationally or internationally, there’s a lot of variables that can affect whether or not a shipment arrives safely or on time. Bad weather plagues some parts of the world, road accidents are unfortunately common, and vehicles can get damaged or break down.

And, if the last few years have taught us anything, it’s that plenty of unforeseen issues can arise to put significant strain on supply chains and shipping.

In this guide, we’ll break down everything you need to know about shipping insurance.

What is shipping insurance?

Shipping insurance is a product for individuals or businesses that can provide compensation or a reimbursement if a shipment is lost, damaged, stolen, or delayed during transit. Upon entering an agreement with your shipping insurance provider, they will take financial responsibility for the goods until they have reached an agreed location in good condition.

Most couriers offer their own form of shipping insurance, but you can also purchase insurance from third-party providers too. Third-party insurance providers are often seen as more reliable than insurance from the carrier, and tend to process claims quicker, have less restrictions, and are generally seen as easier to work with.

Shipping insurance is an invaluable safety net for exporting goods. It’s a peace of mind fee that offers protection against losing assets and lost revenue should anything out of your control occur. Just make sure your items are packed properly, as poorly packed items will invalidate a claim.

 

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What is covered by shipping insurance?

Like all insurance products, coverage will depend on the terms and conditions of the policy you have taken out, as well as the insurance provider you’ve chosen. This means that you will need to do your research and select the most appropriate policy for your needs, making sure that the shipping insurance covers the value of goods and the type of goods you are shipping, as well as the method of shipment.

Typically, a good shipping insurance policy will cover theft, damage, delays, or loss, for a variety of reasons including weather, breakdown, customs delays, and more. Here’s a brief overview different companies within the UK that offer shipping insurance both domestically and internationally:

(Note: the guide below is designed to be a brief overview, and not a replacement for researching the best policy to fit your needs.)

Royal Mail

Royal Mail is the UK’s most popular company for domestic shipping, and businesses can ship internationally with them, too. Royal Mail offers compensation for lost / damaged items as standard, although there’s terms and conditions to be aware of that impose quite a few limitations. They’ll also only cover you up £2500 worth of damages, so you’ll need to take out additional insurance for larger shipments.

DPD

Like Royal Mail, DPD has a built-in compensation programme, but only when you use their Online Shipping Service. The compensation is advertised at £3.40 per KG for domestic shipments, and slightly less for international. If you’re in a contract with DPD, you can insure your shipment for up to £13,000.

Parcelforce Worldwide

Similar to Royal Mail, Parcelforce offer compensation as standard across their express services, for up to $200 depending on the items. For shipments that hold additional value, you’ll need to take out enhanced compensation for loss or damages worth up to £2500 per consignment.

Evri (Hermes)

Evri does have its own shipping insurance, but it’s fairly limited when compared to the previous providers on this list. All shipments up to £20 are covered for free, but you’ll need to purchase an additional policy to insure goods up to £999. This makes Evri fairly friendly for single shipments, but less so for bulk shipments.

DHL

DHL has a Shipment Insurance product that costs £12 or 1.5% of the value for higher value shipments. It’s advertised as a comprehensive coverage for damage or loss, although there are quite a few exclusions on their terms and conditions.

Third-party insurance

In addition to the first-party shipping insurances detailed above (and there’s more we’ve not mentioned), you can also take shipping insurance out via a third party company. Third-party insurance is often more flexible, especially if you’re shipping large quantities of goods that first-party providers won’t cover. It’s easier to tailor a policy to your specific requirements, and you’ll probably find the claims process to be quicker and smoother too.

Benefits of shipping insurance

There are a number of benefits that shipping insurance provides to both your business and your customers.

Financial protection

Not having shipping insurance in place – especially for high value shipments – can have some serious consequences if things go wrong. For many eCommerce businesses, a significant proportion of assets is tied up in stock, and losing it without protection in place can harm growth, and even prove fatal. Shipping insurance protects you against catastrophic losses in the case of unforeseen problems.

Peace of mind

As the old saying goes, you can’t put a price on peace of mind. That’s not strictly true, of course, as in this case it’s the price of your shipping insurance. Having an insurance policy in place can remove much of the anxiety associated with shipping large quantities of your hard-earned goods across the world. You’ll probably find yourself worrying less about whether or not your shipment will arrive in one piece, giving you more mental space to focus on other aspects of your business.

Customer service

If something happens to your stock, you’ll likely need to inform any customers with outstanding orders. While some customers will be more understanding than others, it’ll significantly soften the blow if you promise to send them a replacement and soon as possible. Without shipping insurance in place, it’s more difficult to be flexible with customers, as you may struggle to finance the new order if you don’t get reimbursed by your insurance company.

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Is shipping insurance always necessary?

The importance of shipping insurance generally rises in parallel with the value of the shipment. If you’re shipping small, inexpensive orders, you probably won’t need to find shipping insurance. Most carriers include compensation for smaller shipments as standard, and even if they don’t, buying insurance for every single small order isn’t worth the time or money.

You’ll only really need to get shipping insurance when the value of the shipment exceeds the amount of money you’d be comfortable to lose. This amount will change from business to business – a startup company will likely have a lower threshold than an established, profitable business.

Here’s some examples of scenarios where we’d recommend shipping insurance:

  • Shipping stock to a warehouse
  • Long distance shipping
  • Shipping to locations with extreme weather
  • Wholesale shipping

Need help with shipping? Speak to James and James

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Our fulfilment solution is probably cheaper than you think. We have fulfilment options for every type of eCommerce business, from SMEs to large enterprises. Head over to our pricing page to learn more about our prices.

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If shipping is becoming a headache for your business, we can help. Whether you’re selling in the UK, EU, or USA, you can ship your products to one of our fulfilment centres and cut down on shipping costs, insurance policies, and delivery times for your customers. We work with all major carriers, and our shipping experts will help you pick the most cost-effective shipping solutions.

To find out more, get in touch with us today.