Latest Deep Dive into Shipping Insurance for 2024!

By Mona Sohal
June 19, 2023
Delivery man about to drop a box shipping insurance concept photo

Selling online is great! But sometimes packages get lost or broken on the way to your customer. This can hurt your business because you lose money. And that’s when shipping insurance comes in.

Shipping insurance is like a safety net. It protects you from losing money if something happens to your packages. This is especially helpful for small businesses and for things that are fragile or expensive.

This blog explains all about shipping insurance, why it’s helpful, and how to pick the right kind for your business. Keep reading to learn more!

What is Shipping Insurance?

Shipping insurance acts as a safety net for your shipments while they travel to their final destination. This policy specifically applies to valuable items, protecting them from the moment they leave your hands until they reach the customer. In Canada, shipping insurance safeguards both you (the shipper) and the customer against damage, theft, loss, or misplaced packages.

If mishandling occurs and the goods are damaged during transit, the insurance company or the shipping company will compensate the recipient (usually up to the declared value of the package). There are two main ways to obtain shipping insurance in Canada:

  • National shipping companies: Familiar options include FedEx, UPS, USPS, and Canada Post. These companies offer insurance alongside their shipping services.
  • Third-party insurance companies: These independent providers often offer insurance at more competitive rates compared to national shipping companies.

What is the Declared Value?

When you ship something expensive, you need to tell the shipping company exactly how much it’s worth. This is called the “declared value.” It’s like a price tag for your package.

There reason why this is important:

  • Shipping cost: The more your package is worth, the more it might cost to ship it.
  • Customs fees: If you’re shipping internationally, the government might charge you a fee based on the value of your package.
  • Insurance: If you want to get your money back if your package gets lost, stolen, or broken, you need to get insurance. The amount of insurance you can get depends on the declared value.

Here’s the key thing to remember that declared value coverage is like a documentation for your valuable stuff. It protects you from losing money if something goes wrong during shipping.  

Different shipping companies have their own rules for how much insurance you can buy and how much it costs.

How Does Shipping Insurance Work?

Shipping insurance serves as a risk mitigation strategy for the transportation of goods. It can be acquired at the time of shipment and offers financial protection in the event of loss, theft, or damage during transit.

While some carriers may include a limited amount of complimentary insurance, this coverage might be insufficient for high-value items. Therefore, shippers have the option to purchase additional insurance to ensure adequate financial compensation.

In the unfortunate circumstance where a shipment encounters an issue, the business or individual can file a claim with the shipping company to recoup their losses. To facilitate a smooth claims process. It is crucial to retain all relevant documentation including shipping information, receipts, and proof of the declared value of the items.

There’s also a deadline to file a claim, so don’t miss it! Each company has its own time limit. So be sure to check it out. If you miss the deadline, the shipping company might say no to your claim. Each carrier has its own specific timeframe for submitting claims. Failing to do so within the allotted time may result in claim rejection. Therefore, it is important to keep track of deadlines to ensure timely filing.

What Does Shipping Insurance Cover?

Shipping insurance in Canada protects your package in a few ways, but it depends on who you ship with.  Here’s what’s usually covered:

  • Lost packages: If your stuff never shows up, insurance reimburses you.
  • Broken items: If your package gets tossed around and something breaks inside, insurance pays you back.
  • Stolen packages: If someone snatches your package, insurance has you covered.
  • Mixing things up: If the shipping company messes up and delivers your package to the wrong place, insurance might help.

It is important to note that Insurance isn’t magic! Some things it doesn’t cover like:

  • Suitcases and bags: Shipping insurance is for packages, not your vacation gear.
  • Art and expensive decorations: These need special insurance.
  • Liquids and anything that spills: Spills can damage other packages, so they’re not covered.

Money and important papers: Insurance companies don’t want to deal with cash or important documents.

  • Things you use every day: Your toothbrush or lucky socks aren’t covered.
  • Dangerous stuff: Chemicals and other hazardous materials are a big no-no.
  • Food and live animals: These can spoil or get hurt during shipping.

Double check with your shipping company to make sure you know exactly what’s covered by their insurance.

Factors affecting Shipping Insurance

Selecting the most suitable shipping services and insurance policies is vital when transporting goods. This ensures both product protection and minimizes financial risks for your business. The cost of such coverage can vary depending on several key factors:

  • Value of Goods 

The primary influence on insurance rates is the declared value of your products. More valuable items naturally require more extensive coverage, leading to higher premiums. It’s crucial to ensure this declared value accurately reflects your goods to guarantee full reimbursement in case of loss or damage.

  • Travel Distance 

The length of your shipment’s journey impacts pricing. Longer transit times automatically introduce additional risks. International shipments typically incur higher costs compared to domestic ones due to complex regulations and potential border complications. Choosing faster options like air freight usually translates to increased insurance rates as well.

  • Shipping Carrier

Different shipping companies offer varying levels of standard liability coverage. Reputable carriers with a proven safety record often provide baseline insurance, potentially reducing your need for additional coverage. Opting for a global logistics provider can ensure seamless coordination and minimize the risk of loss during transfers between locations.

  • Cargo Type 

Specialized handling and insurance policies are required for hazardous, valuable, or fragile goods. Alcoholic beverages may face specific taxes and restrictions when shipped. Live animals necessitate qualified handlers and designated facilities along their travel route. Perishable items demand climate-controlled vehicles and expedited shipping to prevent spoilage.

  • Claim History 

Insurance companies consider your past claim history when setting quotes. Frequent or large insurance claims, similar to auto insurance adjustments, lead to higher premiums. Maintaining proper documentation and promptly resolving any discrepancies help establish a positive track record over time.

  • Determining Coverage Amounts 

Determining the proper insurance valuation is critical. Replacement costs must factor in not only the purchase price, but also all associated delivery fees. It’s also wise to consider the projected profits from timely delivery. Consulting past shipping records and purchase histories can assist in making an accurate declaration. Carrying excessively high coverage simply as a precaution ends up being wasteful and unnecessarily inflates your rates.

Types of Shipping Insurance Available

Shipping insurance offers a variety of options to cater to diverse shipping needs.  These insurance policies can be acquired through couriers directly or from independent third-party vendors.  Here’s a breakdown of the most common types:

  • Cargo Insurance: This insurance safeguards the goods being shipped. It protects the owner from financial losses if the cargo is damaged or lost while in transit.
  • Hull Insurance: This insurance provides coverage for the physical ship or vessel itself. It protects against losses or damage to the ship’s hull caused by incidents such as running aground, sinking, collisions, or fire.
  • Freight Insurance: This insurance protects the shipper from financial losses if the cargo is lost or damaged during transportation. The shipper purchases this insurance to be reimbursed for any loss of revenue incurred due to an inability to deliver the goods to buyers.
  • War Risk Insurance: This insurance offers coverage for losses or damage resulting from events like war, terrorism, and piracy. It serves as additional liability coverage beyond the scope of typical cargo or hull insurance policies.
  • Protection and Indemnity (P&I) Insurance: This insurance protects the ship owner from liability claims filed by third parties. It acts as a third-party insurance provider in situations such as oil spills, collisions with other vessels, or injuries/deaths of crew members or passengers.

Benefits of Shipping Insurance

Obtaining shipping insurance from reputable carriers like Canada Post offers a multitude of advantages that can safeguard your business against financial losses in the event of maritime mishaps. Let’s explore some key benefits you can expect to reap:

  • Financial Protection Against Unforeseen Events: Shipping insurance acts as a financial safety net, shielding you from costs associated with losses or damages that occur during the transportation of your goods. These losses can be caused by unforeseen circumstances such as accidents, theft, or natural disasters.

Without insurance coverage, covering these expenses would likely fall on your shoulders. Domestic and international shipping insurance effectively transfers the financial burden of such risks to the insurance company.

  • Peace of Mind Throughout the Shipping Journey: Shipping insurance provides peace of mind by ensuring your goods, customers, and business are protected in the event of a mishap during transit. You won’t have to worry about how to cover the costs of replacing damaged or lost inventory.

The insurance company will take care of investigating and settling any claims filed, allowing you to focus on your core business operations.

  • Maintaining Customer Satisfaction and Brand Reputation: Shipping insurance plays a crucial role in maintaining customer satisfaction and a positive business reputation. In the unfortunate event of lost or damaged shipments, insurance payments guarantee that customers are appropriately compensated or receive replacement orders.

This ensures customer satisfaction and helps avoid negative reviews that could potentially harm your business’s reputation. Essentially, shipping insurance acts as a buffer, protecting the customer experience and fostering a strong business-customer relationship.

  • Meeting Business Partner Requirements:  In today’s business landscape, it’s increasingly common for businesses to require their suppliers to obtain shipping insurance for product shipments. This ensures that any potential losses are covered, minimizing risk for all parties involved in the supply chain.

Having shipping insurance demonstrates your commitment to risk mitigation and helps you meet the requirements of your buyers and suppliers, fostering strong and reliable relationships within your supply chain network.

  • Easing the Claims Process: While filing an insurance claim can still involve some administrative steps, the insurance company takes care of the majority of the legwork. They handle the investigation process, determine claim values, and navigate the complexities of the fine print.

This significantly reduces the time, paperwork, and resources your business needs to allocate to processing claims related to the declared value of damaged or lost shipments. Faster claim settlements expedite a return to normal business operations for your company.

How to File for Shipping Insurance?

While shipping insurance offers valuable protection for your goods, understanding the claims process is essential to ensure a smooth resolution in the event of loss or damage. Let’s look at the process : 

  • Navigating Shipping Insurance Claims:

Filing a shipping insurance claim can be a straightforward process with proper preparation and adherence to established procedures. The claims system aims to protect both the customer and the insurance company. Therefore, maintaining organized records and meticulous documentation are crucial for a smooth claim submission.

  • Gathering Supporting Documents:

The initial step involves collecting documentation pertaining to your lost or damaged goods. This includes capturing clear photographs of any visible defects. Additionally, secure signed delivery receipts from the delivery driver, clearly outlining the condition of the items upon arrival, including the package weight. You will also require your proof of insurance coverage, typically located on your shipping label or contract. Once you have assembled these materials, promptly contact the insurance provider within the timeframe outlined in your policy, which usually falls within 3-10 business days.

  • Filing the Claim:

When filing the claim, provide a detailed description of the lost or damaged items, along with a breakdown of their individual values. Be prepared to answer questions regarding the specific time and location of the loss. The insurance company may request additional documentation, such as purchase receipts, product specifications, or estimated replacement costs.  It is essential to cooperate fully with any investigation undertaken by the insurer. Providing signed statements and allowing inspections can expedite claim resolution.

  • Maximizing Claim Approval:

Several steps can be taken to increase the likelihood of your claim being approved.  These include meticulously packaging your goods, avoiding declaring high-risk items whenever possible, and purchasing insurance that adequately covers the declared value of your shipment.  Always adhere to carrier guidelines, report any problems promptly, and compile comprehensive records.  By exercising patience and maintaining good documentation, most legitimate claims are settled without complications.

Should You Insure Your Shipment?

The decision to insure your shipment hinges on a few key factors:

  • Value of Shipment: Generally, for shipments valued below $100, insurance might not be necessary. However, for items exceeding $100, insurance becomes more cost-effective.
  • Cost-Benefit Analysis: Weigh the cost of replacing the product against the cost of insurance. If replacing the product is cheaper, insurance might not be worthwhile. Conversely, if replacement costs are significantly higher, insurance is recommended.
  • Frequency of Shipping: When shipping frequently, there’s a higher chance of encountering issues. In such cases, insurance can provide valuable protection.

When Insurance Might Not Be Necessary?

There are situations where insurance might not be essential:

  • Replacement Cost vs. Insurance Cost: If replacing the product is cheaper than purchasing insurance, you might opt to skip insurance.
  • Exploring Alternatives: If you feel you overpaid for insurance previously, consider exploring alternative insurance providers, particularly third-party companies, which may offer competitive rates.


Shipping insurance offers peace of mind for a minimal cost. By mitigating the financial risk associated with lost or damaged goods, it protects your valuable items and your business investment.  For a modest premium, you can eliminate the worry of a shipment’s safe arrival.  Isn’t safeguarding your  assets and fostering peace of mind worth this small investment? Ensure your valuable items are covered with shipping insurance – it’s a safeguard against financial loss.

So are you ready to explore options and grow your business? As many carriers and third-party providers provide shipping insurances. And always remember, a small investment can save you a big headache  –  and keep your customers happy!


Is It Worth Getting Shipping Insurance?

Declared value coverage, often referred to as shipping insurance, grants the shipper the ability to recoup financial losses from the carrier in the event of a package being lost, pilfered, or sustaining damage during transportation. This additional layer of protection safeguards the shipper from bearing the complete cost of the package should an unforeseen circumstance arise during the shipping process.

What Is The Role Of Insurance In Shipping?

Marine cargo insurance prioritizes shipment security by mitigating the inherent risks of transit. Coverage encompasses theft, including pilferage (partial theft), for unparalleled peace of mind.

Who Pays Shipping Insurance?

Who pays for shipping insurance? It depends! Usually, the seller can buy insurance to protect your package while it travels. This means the seller pays extra to make sure you get your stuff even if it gets lost, stolen, or broken. But sometimes, sellers might ask you if you want to pay extra for insurance at checkout.

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