Understanding International Insurance

Why should you purchase international package insurance as an online seller? Is it even available for the country your shipping to? Is it worth it? What – and who – is really being protected?  What are the options, and when does insurance make the most sense? Here’s what you need to know, and how to determine the right amount of insurance for what you’re selling.

The Basics of International Package Insurance

Insurance may not be amusing cocktail-party banter, but it’s crucial to familiarize yourself with the general concepts of international package insurance if you’re doing business with customers outside of the United States. In a nutshell:

• Is shipping insurance available for every country? Yes, but not all carriers offer coverage for all countries. In USPS’s case, the mail system of the country you’re shipping to must sign an agreement with USPS regarding handling, security and timeliness of shipment. If a country’s national mail service doesn’t agree to these terms, USPS won’t insure to those destinations, which currently include Mexico and some countries in Africa. As always, check out USPS.com, ask at your local post office or use the resources of online shipping services to find out the latest information. Private carriers like FedEx and UPS offer insurance as well, but similar to the USPS, they both carefully consider to which countries it’s offered. Private insurance companies often offer international shipping coverage to other destinations.
• What is covered with international shipping insurance? Policies vary by carrier and type of insurance, but in general, it protects against damage or loss in transit. For items that are damaged in transit, it is important to note that some policies will only pay for the item to be repaired rather than full replacement cost.  As a seller, you will be required to manage the repair. Also, some insurance coverage only includes the product cost and not the shipping cost.  If your international shipping costs are substantial, you’ll want to research all insurance options to find the lowest cost option.

• When does international shipping insurance make sense for me? If what you’re shipping is fragile or valuable – certainly if it’s worth more than $100, but consider it for anything valued at more than $50 – you can protect your bottom line by insuring your package. Consider the actual cost of replacing or repairing the item before you pull the trigger on buying insurance; for example, a $10 widget probably isn’t worth the cost insuring unless there are special circumstances, but being faced with replacing a $100 item could hurt your bottom line much more significantly.

International Insurance Through USPS

When you ship via USPS, you may be eligible to purchase international insurance at the Post Office or online if you’re using certain mail classes. (Note that availability varies by country and some restrictions may apply.)

• Global Express Guaranteed: You’re automatically covered for up to $100 in loss, damage or reconstruction for free, with additional coverage up to $2,499.
• Express Mail International: This option includes document reconstruction and insurance merchandise up to $100 against loss, damage or missing contents for free. Additional coverage may be purchased up to $5,000.
• Priority Mail International: When you ship via this mail class, you can purchase insurance coverage up to $5,000 for  as little as $2.45.
• First-Class Mail International:  The USPS does not provide an option to purchase package insurance for a package shipped via First-Class Mail International. In order to insure a package sent with First Class Mail International, you must use a third-party carrier.

International Insurance Through UPS

UPS limits liability to $100 on packages with no declared value; for goods valued at more than $100, coverage is available for an additional charge. Prices start at $0.80 per each $100 in value, with a minimum insurance charge of $2.40, for liability against loss or damage up to $50,000.

International Insurance Through FedEx

Similar to UPS, FedEx automatically insures international shipments (except for those of unusual value) for $100. Overall, international benefits are similar to those for domestic FedEx shipments, with the option to add additional insurance for higher-value items for as little as $0.80. (If you choose to add extra insurance, double-check that your insured value and declared value are identical so you don’t run into problems submitting a claim should it become necessary.)

International Insurance Through a Third Party

Many sellers choose to purchase package insurance through a third party insurance carrier. These third party carriers usually provide insurance coverage to additional countries that aren’t allowed by the USPS as well as other mail classes. Rates are generally much lower than the USPS insurance rates and coverage can be purchased for much values as high as $30,000.

One important fact is many third party sellers will insure not only the product cost, but also the shipping costs (USPS only provides insurance for the product itself.) Here are some popular options:

• Shipandinsure.com: Up to $30,000 in coverage for $0.65 per $100 for shipments originating in the United States. Visit http://shipandinsure.com/international_rates.aspx
• U-Pic: Up to $1,500 in coverage starting at $1.15 per unit; prices vary depending on merchandise and destination. Visit http://delta.u-pic.com/Order/OnlineRates.aspx
• Shipinsurance: Up to $1,000 in coverage starting at $1.05 per unit. Visit http://www.shipsurance.com/pop_order_online_shipping_insurance_rates.asp
• Stamps.com: Up to $10,000 in coverage, including countries the USPS doesn’t cover … right from your computer! Visit http://www.stamps.com/shipping/international-insurance/

Self-Insurance

If you’re willing to risk not being covered through the USPS or third-party insurer, consider “self-insurance.” Simply put, if you increase your product prices by a small amount, the net profit will be enough to cover you in the unlikely event that a package is damaged or goes missing. As little as a quarter per item may be adequate to give you that self-insurance, as well as a little peace of mind. The key is to be mindful of the item’s overall cost to the buyer – the price still needs to be right to attract and keep customers.

Insured and Assured

Admittedly, insurance isn’t the sexy side of any business. But being knowledgeable about its benefits and your international shipping insurance options can be reassuring to your international customers and keep them coming back to your shop. That’s insurance in of itself!