Is eCommerce Shipping Insurance Worth the Cost?

Posted by Benjamin Meskin on Jan 16, 2019 2:36:16 PM
Benjamin Meskin

Shipping-Insurance-Cost-Blog

Picture this.

 

You’ve decided to save money on a certain order and forgo shipping insurance. You track the shipment and see it arrives safely at your customer’s address a few days later. Later that day, you receive a notification from the customer that the order was damaged in transit. Now you are down $4,000 and must deal with an irate customer who wants the order replaced on top of this.


It’s true, scenarios like this are easily avoided by purchasing insurance coverage. Most eCommerce manufacturers are well aware of this and agonize on factors such as price and efficiency.


However, there are times when shipping insurance is necessary – and other times when it is less essential.

 

How to Assess Your Shipping Insurance Cost


Typically there is a $1,000 threshold: if packages are worth less than $1,000 and aren’t regularly shipping out then it’s not necessary to have shipping insurance. Common carriers generally insure up to $100 in value.


Another barometer: determine the average cost to insure your item.

 

The basic equation is this:

Shipping Insurance Cost Equation

For instance, you are an eCommerce supplier that sells simulator software games including popular titles such as ‘Train Simulator’ and ‘Euro Truck Simulator’. One of your customers purchases a $500 crate containing several hundred copies of ‘Garbage Truck Simulator’ and its sister title ‘Street Cleaning Simulator’.


Rest assured – even the most desperate of package thieves or opportunists will probably not want to steal the dullest video game of all time. Unless they happen to be a street cleaner or niche simulator enthusiast. Then we take it all back.


Using this fun example, let’s learn how to calculate whether you should purchase insurance. Your eCommerce business sells ‘Train Simulator’ at $500 per unit and ships 250 units every month. Let’s assume that one unit is stolen in transit per month by an eager simulator enthusiast.


One crate divided by the 250 units in total, multiplied by the $500 per unit. So, 1/250 x 500 = 2.


Now we know: if average cost to insure each unit is less than $2 then it makes economic sense to buy insurance for the month. If you used Cabrella Shipping Insurance in this scenario – it would cost less than $2 to insure each unit. Therefore, our Train Simulator friends would be wise to purchase insurance.


But we should note: not all insurers are created equal.

 

Choosing A Shipping Insurance Provider

 

Let's compare average insurance coverage rates between common carriers and 3rd party insurers. The latter are always a better deal than FedEx, UPS and the Postal Service – in many cases up to 90%.


To illustrate – imagine that our eCommerce supplier shipped 200 units of ‘Euro Truck Simulator’ per month.


USPS charges $1,830 per month while Cabrella charges $300. Consider that our eCommerce supplier decides to make the switch to Cabrella: $1,830 - $300 = $1,530 in savings per month.


Assuming $1,530 per month is saved over 12 months, our eCommerce business will make a whopping $18,360 in shipping insurance savings after one year.*

 

 

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So – savings are great. But they’re only a piece of the puzzle. Akin to any sector, eCommerce businesses consider quality and not just price.

 

Why eCommerce Businesses Choose Cabrella

 

We’ve worked in the eCommerce shipping insurance business to understand exactly what makes our customers tick. It comes down to three main areas in which our service seeks to alleviate these issues – almost entirely:

 

1. Simplicity

 

At the end of the day, people want to stop wasting large amounts of time on shipping insurance. They want reduced costs overall and would prefer insurance processes to be more streamlined and actually improve efficiencies.

 

Using shipping insurance software – it’s just less of a headache. You can track packages and file claims in minutes. Most of our claims are paid between 4-8 weeks, with many clearing in only two weeks.



2. Budget Optimization

 

Like any industry, eCommerce businesses want to reduce cost in as many ways as possible. What’s interesting about the Cabrella software is that it can provide overall lower shipping quotes – and it is designed to minimize fees and ‘accidental costs’ in the shipping process.


In our case, we have coverage for up to $150,000 per package on most levels of delivery service. On top of this, our coverage is available for any commodity type – you are protected regardless of the value. We rarely have international restrictions on our shipping which enables you to ship to countries across the world with equanimity.  

 

3. Actively Lowers Risk

 

People want a shipping insurance company that can handle complex claims and process them without any hidden fees or loopholes. If claims can actually be processed quickly and with ease, it’s a done deal.


The benefit of working with 3rd party insurance companies is that we can customize your eCommerce shipping solutions. We provide insurance for any industry and you can tailor solutions easily on our platform. Anything from insuring specific zip codes to requiring signature confirmation only on certain packages.


An example of this at Cabrella – we use shipping insurance software, so businesses can peruse risk assessments by region and review notifications of carrier exceptions. It’s risk management.  Part of our intelligent software feature provides real time information and alerts for specific locations where the ‘risk of loss’ is raised.


One recent example was a $49,900 jewelry shipment that was lost en route from Colorado to California. The claim was paid in less than 8 weeks.

 

The Takeaway


When shipments are worth less than $1,000 and aren’t regularly dispatched then it is not as essential for a business to have shipping insurance. But on the flip side – it’s clear there is utmost importance to maintain shipping insurance for businesses that frequently transport high-value merchandise.


Check out your options today. Save money and take control of your insurance process. On your terms. Click the button below to request a quick quote from one of our insurance professionals and see your savings today. 

 

Cabrella Get a Quote

 

*This tool is for comparison purposes only. Your rates could be higher or lower depending on volume, loss history, and contents- but always a better deal than FedEx, UPS, and the Postal Service. Up to 90% in some cases! 

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