Do you ship items worth over $100?
What happens if that item is not delivered and your customer complains?
If you are an Amazon seller, you are bound by Amazon.com’s A-to-Z Guarantee and the money is automatically refunded to the customer. Most likely, you will refund the customer or ship another item, but you lose your profit and bear the costs of your product and the shipping costs.
The US Post Office, UPS, FedEx, and DHL all offer various forms of insurance if your package is lost or damaged. With these carriers a shipment is automatically protected up to $100 for loss or damage, but if you require more protection than you need to declare a higher value for protection. FedEx and UPS call it “Declared Value”. DHL calls theirs “Shipment Value Protection. The US Post Office offers insurance as well.
The formula works pretty much the same even though the rates are different if you have a retail or commercial account.
For example, for customers with Retail Rates, UPS charges $0.90 for each $100.00 (or portion of $100.00) of the total value declared, with a minimum charge of $1.80. If you had a package that was worth $500, you would subtract the $100 that is included and have $400 or 4 units x $0.90 for a cost of $3.60.
If you shipped 10 packages a month of this value, you would be paying $36 just for insurance!
FedEx charges $.70 per $100 of value with a minimum charge of $2.10.
The USPS starts with the first dollar that you declare, has a minimum of $1.75. For $100 package, the cost is $2.25.
Now here is a secret that many eBay sellers and online merchants don’t know. There are third party insurance companies that will insure your packages for 50% less than the carriers charge.
Here are the rates from one third-party insurance provider: (Full Disclosure—I would receive a small referral fee if you use this service)
- UPS/FedEx Ground $.30 per $100
- USPS Priority Mail with Delivery Confirmation $.50 per $100
This is a HUGE savings. For a $200 package with FedEx, the cost would be $.60 instead of $2.10—a savings of 71%!
For USPS, that $100 package is only $.50 instead of $2.25, a savings of 78%!