Is Small Parcel Insurance Worth it?


April 18, 2011


Shipments under 150 lbs are typically considered small parcel. Most shipping companies like FedEx and UPS will insure such packages up to $100 of product loss or damage. This is one reason many e-commerce sellers ship low cost items without insurance. If you're shipping something fragile, or if you just need more protection, you can opt for "declared value" insurance, which both FedEx and UPS offer. At this point, it's best to compare UPS and FedEx. Some third party insurance companies will insure your packages for 50 percent less than the carriers charge.

When you buy small parcel insurance and make a claim, you need to understand the procedure for collecting the insurance payment. One of the major complaints about extra small parcel insurance is the many "hoops" you have to jump through to file a claim and ultimately collect on the insurance. The small parcel claims process can be labyrinthine in nature, requiring you to fax physical proof of shipment and the invoice value to receive full compensation.  Here again, you'll want to compare UPS and FedEx for the easiest procedures, should you have to file.

One of the things you have to do in many small parcel claim processes is approach the intended recipient to sign the claim.  In some cases, they may not want to sign it to avoid the paperwork and hassle--the forms are long, intimidating and filled with ‘legalese’. If you use UPS or FedEx, the automatic $100 coverage will save you and the recipient from these hassles. That said, some shippers have developed software that automates the claims process, letting you file claims in seconds with just a few mouse clicks. You will want to compare UPS and FedEx against other parcel insurance providers to see which have the simplest filing and recovery procedures.

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