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The Importance of Shipping Insurance During the 2022 Holiday Shopping Season

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Americans are increasingly turning to the Internet for their holiday shopping. With the blossoming of holiday ecommerce sales, it has become a breeze to have holiday delivery for our goodies — all sent right to our doorstep. The postal service and online delivery systems know how to offer us the white glove treatment as we celebrate the holidays and ring in the New Year. 

Ecommerce businesses and retailers work all year to engage with their customers by offering promotions and discount sales, leading up to the big one — holiday shopping.

However, the entire experience can be ruined in the last few moments if the package doesn’t arrive within the expected business days. This time of year is stressful not only for consumers if the package doesn’t come but also for brands hoping to keep their customers happy.

What is Shipping Insurance?

Shipping doesn’t always go accordingly. Packages are sometimes stolen, lost or damaged in the process, whether using the post office or a third-party shipper. 

In a worst-case scenario, panicked parents may get stuck between watching their kids go giftless or going through the hassle of paying for next-day shipping rates to get the package within shorter delivery times. Carriers aren’t perfect, and the cost can be significant for shoppers and merchants alike. 

To remedy that, shipping insurance is a service provided to consumers and manufacturers that protects them when a package does not arrive at its destination due to loss, supply chain issues, theft or damage. If the parcel is insured, the insurance holder will be reimbursed the declared value of the items in the package. 

Depending on the carrier, some packages are always covered. For domestic shipping carriers like FedEx and UPS, all packages are insured up to $100 of value at no cost.

Below is a chart of included insurance values for the three leading domestic carriers in the United States:



Included insurance package value



Up to $100



Up to $100


Priority Mail (domestic)

Up to $100 (CPP) and up to $50 (CBP)

Priority Mail (international), Priority Mail Express (domestic and international)

Up to $200

First Class Mail (domestic and international, Media Mail, Parcel Select

Not included

However, there are packages that cannot be insured. Commonly uninsurable products include:

  • Currency and other financial instruments.

  • Gemstones.

  • Hazardous materials.

Additionally, some high-value items may have a lower coverage limit than others, such as a flat-screen television. 

Shippers often have a maximum declared value senders can set. For example, UPS supports up to $50,000 in declared value with a UPS account number. For packages eligible for Enhanced Maximum, packages can have a declared value of up to $70,000 per package.  

Providing insurance to your customers in the holiday season is critical for both your customer retention and your bottom line.

Differences Between Buyer and Sender Shipping Insurance

There are two categories of shipping insurance, buyer and seller. The primary difference is the consumer funds that buyer shipping insurance while seller shipping insurance is sender-funded. There are different processes for each. 

Buyer shipping insurance.

Buyer insurance is consumer-funded, meaning at the point of checkout, the buyer has the option of adding shipping insurance to their overall cart and charged to their credit cards. The cost is typically around 1.5% of the cart value to protect your purchase from lost, damaged or stolen parcels.

There are two options for merchants to offer buyer shipping insurance: opt-in and opt-out. The difference between them is the default setting. 

For opt-in insurance, consumers check the box if they would like to insure their package for an additional cost, as the default is no insurance. For opt-out insurance, buyers will check the box to decline insurance on their package — the default is to add insurance. 

Seller shipping insurance.

Seller shipping insurance is sender-funded, meaning insurance is included on all packages sent to the buyer. Sender shipping insurance is growing increasingly common, as it’s now often expected that the seller is responsible for the package until it makes its way to the buyer’s door. 

Some sellers will try to shift the responsibility to their package fulfillment partner. However, this can often be a frustrating experience for consumers who engage directly with the brand. Part of the difficulty is often a waiting period from the brand to the consumer, ensuring the package is gone and not just late. As you can imagine, this doesn’t go over well with consumers.

For sellers to offer proper shipping insurance, it must be backed by an insurance company such as Lloyds, Shipsurance, InsureShip and others. If a provider does not back shipping insurance, the brand can either upcharge a consumer or accept responsibility for the seller’s full-cost burden. 

Why You Need Shipping Insurance for Your Brand

If brands can hand the cost of insurance off to the customer, that seems like a great idea, right? The answer isn’t so simple as it’s not always in favor of the brand or consumer to add those upcharges. 

In an increasingly digital world — especially since the coronavirus pandemic — it likely makes more sense for sellers to absorb the cost of insurance instead. While it may seem like a high cost, the positive impacts will be far more significant. 

Here are four reasons why it’s in brands’ best interest to pick up the insurance costs: 

Mitigate risks of costly theft, loss or damage. 

The first and most apparent benefit of shipping insurance for businesses is risk mitigation. If a product is uninsured and gets lost, stolen or damaged, the seller is typically on the hook to cover the costs. They’ll have to fully absorb the mailing and product costs to ship another product to the customer. 

With insurance, the value of the package is reimbursed in these cases. Sellers can protect their bottom line while keeping the customer happy.

Protect your brand image at a lower cost. 

A negative post-purchase experience such as an unresolved stolen, damaged or lost package will likely lend itself to angry customers, poor word of mouth, social media backlash and a customer who will not return. 

To keep your customers happy, investing in their experience can ensure your brand’s reputation. Sellers can think of it this way: Choose between covering the total price of a product or the cost of insurance to keep customers happy and your brand reputation protected. 

Increase your revenue. 

A positive experience will bring your customers back and increase their brand loyalty. 

 The relatively low cost of shipping insurance will protect the customer experience after purchase while likely creating increased revenue in the future through higher customer lifetime value — not to mention positive word-of-mouth marketing. 

Ease of use and peace of mind. 

Many insurance carriers now offer simplified claim filing processes — some even let you file one-click claims. This ease of use leads to even more positive experiences as customers no longer have to fill out page-long insurance claims or deal with lengthy approval processes. 

All of this offers consumers and brands peace of mind — consumers’ packages will arrive within shipping deadlines and brands’ bottom line will be protected. 

Shipping Insurance Costs

It’s important to note the cost of shipping insurance. Each carrier offers different options and prices to insure your packages on top of shipping costs.

See the table below for a breakdown of carrier options:


Value of Package

Insurance Price

Up to $50.00


$50.01 to $100.00


$100.01 to $200.00


$200.01 to $300



Value of Package

Insurance Price

Up to $100.00


$100.01 to $300.00


Every additional $100.00 value over $300.00



Value of Package

Insurance Price

Up to $100.00


Every additional $100.00 value over $100.00



Value of Package

Insurance Price

Up to $100.00


Every additional $100.00 value over $100.00


Minimum for $300.00


Carrier Insurance Comes with Big Caveats

The above might give the illusion that choosing carrier insurance is an easy decision. The prices are relatively low, plus these are practically household names synonymous with quality delivery.  However, while carriers might offer insurance, they aren’t the best at reimbursing when something goes awry.

First, each carrier has a long list of reasons they won’t fulfill a claim, including events like:

  • Loss or damage that occurred after delivery, AKA theft.

  • Goods that were scraped or damaged because of insufficient packaging.

  • The proper insurance documents cannot be found.

  • Perishable items are spoiled by the time they are delivered.

  • The claim was filed past the acceptable time limit.

The second point to consider is that carriers aren’t rushing to reimburse insurance claims. If your customers are counting on shipping insurance through a carrier, they should be ready to wait a couple of weeks to be reimbursed — if their claim is even accepted.

Lastly, the experience is often anything but ideal. The time limits to file a claim vary with each carrier, package type and whether the package was international or not. Some carriers only accept claims from the shipper, which means customers are counting on the brand to be a good middleman between them and their reimbursement.

Filing a claim through each carrier is full of friction, often including some degree of evidence and document gathering, tedious form fields and figuring out the appeals process if the original claim wasn’t sufficient for reimbursement. 

In the end, your customers are being robbed of the money they paid toward insurance through the carrier as well as any sense of a positive experience with your store. 

What Are the Risks if I Don’t Use Shipping Insurance? 

Without shipping insurance, there is considerable risk to your order fulfillment process. However, not all risk is created equally. 

The following considerations will guide sellers in deciding whether or not they should purchase shipping insurance:

Item types. 

The risk of a failed delivery service depends on the product type, as some categories are more likely to be stolen than others. 

 Designer brands and items are more likely to be resold or pawned, while small and lightweight packages are some examples of the things most likely to be stolen. Porch pirates look for packaging or return labels with brand names, so a best practice would be avoiding an exterior box that showcases a flashy brand name or shipping labels that indicate what’s inside.


The risk of failed delivery also depends on where the products are delivered. Some areas are simply riskier to send to. 

As you may guess, highly populated urban areas face the most package theft, but suburban and rural areas aren’t out of the woods either. Porch pirates will often follow delivery trucks and steal the package moments after it’s dropped at the door, unseen by anyone. 

Adding tracking or signature requirements can help cutoff this risk, but many carriers impose coverage limits even then. For international shipping, the best practice is always to insure the order, as customs adds another risk factor.


The risk of a failed home delivery also depends on the time of year the order is placed. 

Unfortunately, the most wonderful time of the year is also the season when a high percentage of packages get stolen. An influx of online shopping translates into an influx of package theft. Thus, the holiday shopping season is considered a much riskier time for package theft than other times of the year.

The Final Word

Brands must prepare for the holiday shopping season, especially as each new season seems to lean into the digital buying experience like never before. To be ready for Black Friday and Cyber Monday, brands must create positive experiences across the entire customer journey to win customer loyalty and outperform their competition this holiday season. 

One of the best ways to create a positive customer experience during the post-purchase part of the customer journey is to provide accessible, generous holiday shipping policies in the case of loss, theft or damage. Such an experience can be costly to brands, so investing in shipping insurance can be an excellent protection to take responsibility for their products until they reach the customers’ hands. 

Ultimately, once a product is purchased, the brand is winning, but the experience isn’t over yet. Until their product is delivered into their hands, the customer journey is still your responsibility, and how it ends can define how your brand is viewed.

Dennis Anderson avatar

Dennis Anderson is a Content Marketing Writer at BigCommerce, where he specializes in SEO content strategy, writing and research. He holds dual degrees in English Literature and Humanities from Florida State University. Prior to joining BigCommerce, he worked on marketing teams spanning industries, from film production to telecom and utilities.