Everything You Need to Know About Ecommerce Parcel Shipping Insurance Before You Ship
As an ecommerce retailer exporting goods, there are three main concerns when shipping your consignments that you must consider.
- Your merchandise reaches its destination
- That it makes it within the stipulated period.
- And that the goods are in a usable condition.
Of course, as a retailer you will do everything you can to ensure that your goods are well taken care of at every point during transport.
However, there are some factors that are out of your control including mishandling of goods, theft, weather or natural disasters and political uprisings.
The best way to combat shipping losses is with ecommerce parcel shipping insurance. This insurance protects your business from these possible losses and could be the difference between declaring bankruptcy or weathering the storm to fight another day.
Consider this your all-encompassing guide to everything you need to know about ecommerce parcel shipping insurance before you ship!
What is Ecommerce Parcel Shipping Insurance?
Shipping carriers are legally bound to insure any goods they agree to deliver, but this is typically liability insurance and does not always cover the full cost of items – especially expensive and high budget items. To achieve maximum liability and avoid losses, you should opt into a shipping insurance that is greater than the basic liability provided by the shipping company.
Shipping or cargo insurance enables retailers to protect their consignment and is typically applicable from the time the merchandise is shipped until they reach their destination. This insurance protects you from any possible theft, damage, mishandling and other issues related to your goods.
Types Common Risk Coverages
There are many variants of shipping insurance with each having its own purpose. The best way to select the best policy for your business is to compare what types of coverage each provides and choose the one that meets your needs the best.
Types of risks that shipping insurance protects against include:
About 14% of Americans have experienced porch piracy over the past 12 months. This results in an estimated 35.5 million Americans reporting an average of $156.82 from stolen items. Annual, package theft results in more than $5 billion in losses for retailers. The solution: use an ecommerce shipping insurance that protects your packages from front-door theft or porch piracy.
While transporting merchandise over long distances, it changes hands often. As the goods are loaded or unloaded sometimes it is mishandled and damaged. Due to inclement weather, transport accidents and other various issues while in transit the shipment may be damaged. Shipping insurance protects against these risks under physical damage coverage.
Stock Throughput Damage
Stock throughput damage is any damage that occurs in your own warehouse where items have been imported to be transported further. This coverage insures your product from any damage that has occurred in your warehouse.
International Rejection Risks
Some cargo is often rejected at port of entry during international shipping due it not meeting specific standards and adhering to local regulations. International cargo rejections incur a heavy cost to the supplier due to non-payment of goods. Depending on the policy, rejection insurance provides either full or partial coverage of the transaction.
Numerous suppliers ship product samples all over the world to exhibitions and expos for potential buyers to see their merchandise for themselves. The process poses risks to the product during transportation and at the exhibitions itself. Exhibition insurance provides coverage from damage during transport and at the exhibitions.
Benefits of Shipping Insurance
Ecommerce shipping insurance can help protect your outbound shipments in a variety of different ways. Here are some common benefits you can enjoy when using it for your retail business.
- High-risk protection
Without shipping insurance, your business could be left to foot the bill for losses of big-ticket items which could potentially lead to the need of declaring bankruptcy. Instead, the insurance company will reimburse you for losses suffered either partially or in full.
- Accident protection
No matter how well ecommerce retailers and shippers practice mindfulness and safety in the workplace, accidents still occur. Being proactive and insuring your business against these potential accidents will prevent you from suffering insurmountable losses on your own.
- Provides sense of security
Insuring your consignments will offer you peace of mind rather than continuously worrying about all the ways it could be lost or damaged. When your merchandise is insured from the common mishaps of daily logistic processes, you can have a clear mind to focus on running your ecommerce business.
- ‘General average’ costs protection
During shipping if a carrier is damaged all suppliers that are taking part in the trade must pay a specified amount to cover those damages; this is known as ‘general average’ costs. Without payment for damages the carrier will not release the goods. With shipping insurance, your insurer will pay the carrier and not you.
- Even the most reputable shipping companies fail
Carriers such as UPS and FedEx did not get as large as they have by being untrustworthy, but even the most reputable shippers can come up short of a success rate of 100%. You only need to look as far as the supply chain nightmare that has gripped the entire world since the beginning of the COVID-19 pandemic to understand this fact. With proper shipping insurance you can compensate your customers for problems such as these at no cost to you.
- One in every 10 packages arrive in ‘poor’ condition
Depending on which carrier you choose to conduct business with to ship your goods, 7% – 11% of packages arrive in ‘poor’ condition. Insuring your shipments protects your business from loss and helps your customers as well.
When is Shipping Insurance Worth It?
If the cost to fix all delivery issues is lower than what you paid for all your policies, then it is certainly cost-effective. Compare the delivery error rate of your shipments to the cost of insuring them. To calculate the cost, make sure to account for the item’s value and the replacement shipping value. In the end whether it’s beneficial for your ecommerce business to purchase parcel shipping insurance depends on your merchandise value, unique business and desired profit margins.
How to Reduce Cost
All high-value items should always be insured to protect your business from loss. In fact, many retailers wisely tack on the cost of parcel shipping insurance into the price of their high ticketed items. If a customer is buying an item such as a diamond ring, being charged $3 more to protect their purchase won’t be an issue for them.
Another clever way of limiting the cost of shipping insurance is to offer insurance at checkout to customers using an ecommerce shipping software like ReadyShipper X – which has InsureShield Shipping Insurance built into the interface. Shipping insurance at checkout gives customers the choice to add shipping coverage for their purchase directly to their cart and the customers pay for the coverage themselves. Insurance rates are pre-calculated to each order and are typically very affordable and appealing to consumers.
Ecommerce shipping insurance is incredibly beneficial to ecommerce retailers and protects them from the uncertainty of today’s fast paced, ever-changing world. Hoping that something does not go wrong with a shipment is not a suitable risk-loss mitigation strategy. Protect your merchandise and your company and insure your consignments!