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.
Here's 5 Dirty Secrets About Carrier Declared Value Insurance
- There's a minimum charge once you go over $100 in value.
- The carrier will add $1.05 on top of the minimum charge at a certain level.
- Not all packages should be insured.
- You don't have to use UPS's or FedEx's insurance options
- Carrier insurance options can be combined with 3rd Party insurers.
Secrets are no fun. Especially declared value insurance secrets. Because without the right info, you might end up paying way more that you need to. But don't worry, we'll explain everything below. We even made a video.
Just like everything else with UPS and FedEx, declared value insurance can be confusing. If you have any questions, or need help assessing the best insurance options for your packages, Lojistic can help.
You might be asking yourself, "Is UPS insurance worth it?" "Is FedEx insurance worth it?" "Should I use a 3rd Party insurer?" Regardless of which insurance option is best for you, Lojistic can ensure you're as efficient as possible with your spend.
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 an amount 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. You can get a free shipping analysis by creating a Lojistic account.
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.
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.
Insurance Options Through Lojistic
The solution you can access through Lojistic offers an insurance option along these lines. If you wanted to use a carrier for the first $100, Lojistic can can plug you into an option that gives 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.
It’s possible, however, to lock in a static insurance option through a third-party insurer. Lojistic's solution has one, and the rates we can plug you into 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.
You've made it to the end of the post! Congrats. Now you know the carriers' dirty secrets about declared value insurance. To uncover deep cost savings opportunities within your UPS/FedEx invoices, set up a free Lojistic account, or check out a demo account