5 Dirty Secrets About Carrier Declared Value Insurance


5 Dirty Secrets About Carrier Declared Value Insurance

Editor's Note: This post has been updated with new links and content.
Original Publication Date: May 21, 2015


In this post, we’ll cover declared value and declared value insurance.

Let’s start by explaining what declared value insurance is.

What Is Declared Value Insurance?


Declared value insurance is any value that a shipper will put on the contents of what they're shipping.

The purpose of declared value insurance is to ensure that if a carrier loses or damages the shipment, the shipper can reimburse that value to you.

Declared value is offered by most carriers, including FedEx and UPS. Some carriers have specific guidelines for this particular insurance, which we’ll discuss in more detail below. But the pricing is essentially the same throughout the industry.

How Does Carrier Declared Value Insurance Pricing Work?


If a freight broker or shipper is new to declared value insurance, it’s important to understand how the pricing work.

For both UPS and FedEx, insuring the first $100 of declared value is free. In other words, if you declare anything up to $100, you get that insurance for free and you can be reimbursed that value.

If you claim something over $100, however, even by one penny, they will charge you. The minimum is $3.15 for FedEx and UPS. You don't tack more on until after about $300, and it’s roughly $1.05 after that.

Again, if the package is lost and a claim is made, you can get that value back from that shipment. If it reaches the recipient and the box is destroyed or the contents inside are damaged, you can get that cost back as well.

It’s important to reiterate the $100 threshold because you can incur charges if you’re not careful.

For example, if you insure a package with a declared value of $101, the first $100 is free, but you’ll pay UPS or FedEx $3.15 in fees for $1 of value. Which is not ideal for optimizing your shipping costs.

What Packages Need Declared Value Insurance?


Certain shipping characteristics, package types, commodities, and more must be considered for insuring declared value. It's different for every company, every situation.

You’ll want to start by analyzing what you're shipping, how often it gets lost or damaged in transit, and then make your decision based on that.

Third-Party Insurance Options for Shippers


Shippers who want to insure their packages but don't want to use the declared value insurance options that FedEx and UPS offer can choose a third-party option.

In fact, third-party insurers will do it for a fraction of the cost. They have no minimums, and they won’t have that $3.15 after $100 charge. Rates can be as low as 40 cents for every $100, so if you ship something that's worth $200, it will cost 80 cents as opposed to $3.15.

Workaround Options


Experienced shippers who understand how to use declared value can get that first $100 free and then insure the remaining amount in a more cost-efficient way.

By starting with the $100 initial free coverage from FedEx or UPS, shippers can insure the extra amount with a third-party insurer.

Let's use $200 as an example. You can insure the remaining $100 through a third party, which only costs 40 cents, after getting the first $100 for free.

Lojistic Insurance Options


Lojistic offers an insurance option along these lines. If you wanted to use a carrier for the first $100, Lojistic can give you the extra $100 insurance for a fraction of the cost, no minimum.

Avoid Overpaying on Declared Value Insurance


Certain industry tools and visibility can help prevent a client or a shipper from overpaying on insurance.

As we mentioned above, start by looking at your data. Analyze how much you're spending on those declared value insurances that are over $100. And make sure that what you’re shipping is actually valued at higher than $100.

For example, sometimes you can put a declared value on something that's worth less than $100, and then you're paying for declared value insurance with the carriers for no reason.

That data and information is readily accessible on the Lojistic platform. A view shows you the costs for declared value insurance, so you can look at exactly what shipments you are getting dinged on for those declared value costs.

Insurance Cost Increases & Static Rates


The cost of UPS and FedEx declared value insurance increases regularly.

They seem to do it on a yearly basis. Back in 2016, it was $2.70, and they've been upping at about 15 cents per year, to $3.15 now. And that's just the minimum — the supplementary cost has gone up as well. It was 50 cents, then 60 cents, 70 cents, and now it's $1.05.

declared value insurance

It’s possible, however, to lock in a static insurance option through a third-party insurer. Lojistic has one, and our rates haven't changed in five years, it's been 40 cents for every $100 for a long time.

For more information on how you can join the thousands of shippers nationwide using Lojistic to send cost packing, please contact us.