Most E-commerce sectors in Australia have experienced growth of over 30% since 2021.
If this is the case for your E-commerce business, firstly, congratulations! Secondly, booming E-commerce sales can mean diversifying your product offerings and exploring more expensive lines to drive more revenue.
This initiative comes with a problem, which is ensuring that your shipping goods arrive safely in your consumers’ hands. Product shipping insurance is the answer to this particular conundrum.
To learn more about protecting your shipping goods, keep reading this simple guide!
What is shipping insurance?
Shipping insurance is your business’s protection against shipped products via carriers to consumers, and typically covers situations like lost, stolen, or damaged goods in transit. Shipping insurance takes care of the financial responsibility for the goods you ship until they arrive at their final destination.
As an E-commerce business exporting shipments, you have three main duties.
Your shipments must:
- Reach their destinations.
- Arrive within the designated time period.
- Be in a usable condition upon arrival.
If your business’s shipped goods are improperly handled and arrive damaged, your shipping insurance covers you against the cost of the goods.
What does shipping insurance cover?
A standard shipping insurance policy usually covers incidents in which a business owner has no control. These can include delivery delays and damage or theft of goods, but every insurance provider has a different set of policy rules.
It’s worth noting that the liability cover you get with major shipping carriers does not cover your business to the extent that shipping insurance does.
How does shipping insurance work?
You must buy shipping insurance in advance of shipping parcels. You can buy shipping insurance from your carrier directly or from a shipping insurance provider. If your business handles large volumes of expensive shipments, it’s probably best to contact an insurance provider for a quote.
Once you’ve bought your business’s shipping insurance, you’re eligible to claim for the full value of any lost or damaged goods. You can then rely on your insurance provider to form part of your company’s plan for business continuity strategies.
How much does shipping insurance cost?
The cost of E-commerce shipping will vary for each business. The majority of factors that influence the cost of your E-commerce shipping insurance include:
Shipping distances: How far do you ship packages?
Shipping destinations: Countries you ship goods to, and the specific rates of damages, losses, and thefts related to those countries.
Shipping volume: Do you need to ship valuable goods regularly or sporadically?
Goods value: The declared value of your shipped goods.
Claims history: Whether you have a history of insurance claims.
Common shipping risks
Deciding upon whether to invest in shipping insurance and the best policy for your business depends on your company’s needs.
Some types of risks associated with shipping packages include:
Numerous unloading and loading can cause physical damage to shipments, as well as transport accidents and inclement weather. Most shipping insurance policies protect against these physical damage risks.
Depending on the location your business ships to, you may want the protection of porch piracy from your shipping insurance provider. Stolen packages from porches can be covered with specific insurance criteria.
Stock throughput damage
This type of risk occurs in your business’s warehouse. Some shipping insurance providers offer protection against damage to your stock and packages before they are shipped to their next destination.
International rejection arises when shipments don’t meet the country’s specific standards and are prohibited for further transportation.
How to know if you need shipping insurance
Here are some factors to consider if your business needs shipping insurance:
Business model: If your customers expect a free product replacement if their order is lost, you should consider shipping insurance to manage their expectations.
Product costs: High-end goods should be considered for shipping insurance protection. Assess the average value of your products to determine the need for shipping insurance.
Shipping volumes: Shipping at high volumes is certainly a factor for requiring shipping insurance, especially if your orders’ total value is considerably higher than the insurance cost.
International shipping: If your E-commerce operation frequently ships goods internationally, shipping insurance is a good idea. International shipments are more likely to get lost or damaged due to travelling further afield.
It’s worth noting here that shipping insurance providers typically don’t cover goods under categories covering furs, original or fine art, and perishable cargo.
When considering the business case for insuring your business’s shipments, a cost and risk analysis can help aid your decision:
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Shipping insurance values
When it comes to shipping insurance values, you have two choices:
The declared value is the value your business declares for a shipment package, so bear in mind that, in the event of a claim, you must prove the value of the shipment. The shipping insurance provider will compensate you with the smaller value between the declared value and the goods’ actual worth.
Items covered within the insurance
Most shipping carriers provide free coverage up to a specific value. However, this value is based on the entire shipment, not each individual order. To be covered for the complete shipment, you need additional insurance protection.
Key benefits of shipping insurance
Shipping insurance goes a long way to creating positive customer experiences and reinforcing your brand’s values. If you partner with other companies via an affiliate program, it’s worth communicating your shipping insurance plans so that they can market this benefit of doing business with you. Learn how to find companies with affiliate programs here.
The responsibility for securing your shipments and associated issues lies with your insurance provider.
Peace of mind
Investing in shipping insurance takes care of the logistical element of your E-commerce business, leaving you free to run the rest of your business tasks, such as implementing a virtual receptionist for small business operations.
Shipping insurance protects your business’s brand as customers are compensated swiftly if shipping problems occur.
Satisfied customers that experience great customer service from your company are likely to be more loyal, so your customer lifetime value can increase.
How to reduce shipping insurance costs
An option to reduce your E-commerce business’s insurance costs is to offer insurance to your customers at the checkout.
Shipping insurance at the checkout gives your customers the choice to add order protection combined with their order cost. You could trial this approach and monitor the success with an interactive voice response (IVR) business phone feature.
Is shipping insurance worth it?
Shipping management can be a complex process. If your business handles expensive goods and ships to international destinations frequently, investing in shipping insurance is a good option. By protecting your E-commerce company’s shipments, you ensure that your business capitalises on customer satisfaction rates and keeps your valuable reputation intact.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."