Article
The Importance of Shipping Insurance in Crowdfunding
Many crowdfunders run into surprise costs when their campaign reaches the fulfillment stage. This is because an estimated 3-5% of shipments never reach the customer’s doorstep due to loss, damage, or theft. And when a shipment goes awry, it falls to you to replace the item at a loss.
Shipping insurance is a value-added feature that shipping couriers and shipping software offer to help you mitigate the risk of loss. If an insured package doesn’t reach its destination or is damaged en route, you get reimbursed for the declared value of the package.
Package protection is increasingly popular in a world where shipping snafus are costly and common. For just 1-2% of the item value, you can insure your packages up to $5,000. Savvy campaign managers, especially those with high-value items, use shipping insurance to safeguard their bottom line, as well as ensure customer success.
Here’s how shipping insurance can help your crowdfunding campaign, and why it should be a consideration for your budget.
How Shipping Insurance Works
Packages get lost, stolen, and damaged in transit every day. Porch piracy is also on the rise worldwide. When you insure a package, you get reimbursed for the declared value if it’s lost, damaged, or stolen. You file a claim with the insurance provider to receive your payout.
Typically, the cost of shipping insurance is around $1 for every $100 of product insured, plus a minimum fee of $2-3. This means a $1,000 item costs $10-12 to insure, on average. These amounts are on top of the included $50-$100 of shipping insurance included in most courier shipments.
Here’s the shipping insurance pricing from USPS:
The cost of shipping insurance varies slightly depending on if you purchase from a shipping carrier, or use third-party shipping insurance. You can also add insurance to any shipment created in your shipping platform.
For example, Easyship lets you insure any package up to $5,000. You can insure a package for its full value or just a portion of the value. This is a flexible and budget-friendly alternative to paying for full insurance on every shipment.
Who Should Consider Shipping Insurance?
For crowdfunding campaigns with high volumes of shipments or high-ticket items, insurance is almost guaranteed to save you money. Here’s a good rule of thumb: if the average cost to replace an item is more than the average cost to insure the item, you may want to add shipping insurance.
Let’s say you need to ship 500 orders of high-end headphones priced at $300 each. Based on the estimated 5% loss rate for shipments, research suggests that 25 of your shipments will never reach the backer’s door.
Here’s the shipping insurance formula:
Average cost to replace an item: (25 lost items / 500 total items shipped) * $300 = $15
Average cost to insure a $300 item: $6
Since the average insurance per item is less than $15, it makes sense to purchase insurance. This is because the expected pay-outs from insurance will more than cover the expected losses incurred over all shipments.
Filing a Shipping Insurance Claim
Each insurer has its own rules for filing claims, so be sure to familiarize yourself with the terms before you buy insurance. Generally, the claims process involves a few steps.
1. Demonstrate Proof of Loss
- Damaged items: You will need to submit proof if an item is delivered damaged. This means the recipient should not desire the package until the claim is paid. For certain courier services, the damage must be reported when the package is signed for undelivered.
- Undelivered items: If an item is not delivered, you’ll only need to supply proof that the item was picked up from your location.
- Stolen items: Items that are stolen after delivery is completed may not be covered. Check the policy of the insurer to make sure. In many cases, insurers will only cover packages that can be tracked.
2. Show Proof of Value
In most cases, you can show the insurer your listed item price in your web store to establish the item value.
3. Observe The Filing Timeframe
Double check with your insurer on how early and how late you can file a claim for shipping insurance. This can vary widely depending on the shipping methods. You don’t want to miss your filing window.
4. Wait For Reimbursement
How soon until you receive your pay-out for the insurance claim? Again, this varies widely by carrier. Some courier services may take weeks, while third-party insurers like Insureship can pay out in as little as five days on average.
Using Third-Party Insurance
Like most insurance, the insurance policies of shipping couriers are created to be complicated and deny claims as often as possible. In other words, the shipping insurance from couriers like USPS, FedEx, etc. are worth missing.
For time and cash-strapped crowdfunders, it’s better to use third-party shipping insurance. Third-party shipping insurance pays for claims at higher rates because their sole mission is to provide insurance. By contrast, shipping companies use insurance as a value-add to boost their bottom line, meaning that every claim they deny is money in their pocket.
Third-party shipping insurance is priced to compete with courier companies. With Easysip for example, crowdfunders pay just 1% of package value for domestic shipments, and 1.5% for international shipments. With Easyship, you can insure any package up to USD$5000.
How to Insure Shipments with Easyship
Easyhip is the leading shipping platform for crowdfunding campaigns. The all-in-one shipping platform works seamlessly with Indiegogo and other eCommerce tools, letting you manage all shipping activity in one easy-use dashboard. Easyship has also partnered with third-party provider Insureship to help crowdfunders protect their shipments.
With Easyship, you can add shipping insurance to any order in one of two ways. First, you can add insurance from Insureship when you buy your shipping label. You can also set up shipping rules to automate which orders receive insurance in checkout. For example, shipping rules lets you apply insurance to shipments based on the following criteria:
- Destination country (domestic vs. international)
- Customs valuation threshold
- Order value threshold
- Shipping courier
Easyship offers two ways to add the option of shipping insurance to your crowdfunding campaign.
1. Easyship Collect
This crowdfunding-specific feature sends surveys to collect shipping information from your backers, including preferred shipping option, the ability to pre-pay taxes and duties and the option for shipping insurance, if desired.
Using surveys lets backers choose whether they want to protect their shipment at the value-based pre-calculated rate for their order. This way, there’s no friction around surprise costs, and backers get the final say. Meanwhile, you protect yourself from loss and mitigate against any customer service hassles in the future.
2. Customize Your Insurance Settings
Shipping insurance is only worthwhile if you can afford it. This is why Easyship lets you set up insurance packages for their full value or just a fraction. Meanwhile, you can customize these settings so all your shipments automatically receive insurance how you want it.
Here are the three options available on the insurance settings page in the Easyship dashboard.
As you can see, there are three ways to offer third-party shipping insurance:
- Selling price: Offer insurance on all orders above a certain value threshold. The final cost is calculated as 1% of a domestic order, or 1.5% of an international order. You can choose whether to include duty and tax in price for international orders.
- Flat cost per shipment: This option allows you to set a fixed amount of insurance you offer for a shipment. For example, this could be $2 per shipment or the full amount needed to cover the full item value. With this option, you can never overpay for insurance because your cost is locked at a certain amount. The 1-1.5% rates for shipping insurance are also fixed, so you can calculate exactly how much coverage you can afford per item.
- Percentage of shipment value: For example, you could insure each of your 500 headphone shipments for $150 instead of the full $300. This means if something goes awry, you’ll only be on the hook for 50% of the shipment and insurance will cover the rest. This is a great way to allocate your remaining budget to cover all shipments up to a certain amount, thereby mitigating loss across all orders.
Shipping Insurance For Crowdfunding Campaigns
Shipping is often overlooked by crowdfunders, but the profit loss on shipping snafus should not be dismissed. For this reason, campaign managers should consider shipping insurance as just another feature of a well-constructed fulfillment plan. This is especially true for campaigns with high-ticket items, or a high-volume of shipments.
Shipping platforms like Easyship offer flexible options for third-party shipping insurance. You can insure the entire shipment or just a portion, depending on your available budget. This is an appealing option compared to shipping insurance from couriers, who only insure items one way and tend to reimburse on fewer claims.
Want help creating a customized fulfillment plan for your crowdfunding campaign? Get in touch with Easyship’s dedicated crowdfunding fulfillment experts for a full walkthrough, or simply create your free Easyship account to get started.
