Shipping insurance explained: How it works & when you need it

Not every parcel arrives as planned. Damage, loss, or theft in transit can happen. Here’s the hard truth: 3 out of 4 merchants have dealt with lost or damaged parcels in the past two years. And the real nightmare? Fixing those mistakes can cost up to 17× more than the original shipping fee.

And it’s not just about the money…41% of customers say that delivery issues make them think twice about buying again at a brand. Whether it’s a stolen package or a smashed product, these moments cost you revenue, reputation, and repeat business.

That’s where shipping insurance comes in. And it’s not the same as basic carrier coverage—and that confusion is where many merchants lose money.

This guide breaks down everything you need to know about protecting your parcels and your margins. Let’s dive in!

What is shipping insurance?

Shipping insurance protects your business when something goes wrong during delivery, like a parcel getting lost, stolen, or damaged in transit. It gives you a way to recover the full sales value of the shipment (not just the product cost), sometimes even including the costs for the return and reshipment.

That’s a big difference from carrier liability, which only covers a fraction of the value, usually based on weight, not what the item is actually worth.

So if you’re shipping a €150 pair of sneakers, your carrier might reimburse just €3.40 per kilo. That’s barely enough to cover the box.

There are three main ways merchants typically get coverage:

When do you need shipping insurance?

In short…always! It’s a very wise idea to have some type of insurance on the packages you ship.

But the key question is: do you need additional shipping insurance, or is the coverage included from a carrier enough when insurance is included?

Here’s a simple framework to help you decide when it’s worth adding coverage:

When to insure a shipment

• Shipping high-value items: If you want to protect the profits from expensive orders, it’s smart to insure them. Replacing high-ticket items out of pocket can quickly eat into your margins.
• Selling fragile or easily damaged goods: Think electronics, ceramics, glassware, cosmetics, or anything with delicate packaging.
• Shipping internationally: Cross-border deliveries carry more risks: customs delays, longer transit times, more handling.
• Dealing with peak season volumes: Carriers are overloaded during the holidays, which means more delays, delivery mistakes, and mishandled parcels. Insurance adds a layer of protection when things go wrong.
• Offering premium customer experience: Shoppers expect fast refunds or reships if things go wrong. Insurance helps you deliver on that promise without hurting your margins.

On the flip side, if you’re sending low-value items or products that are cheap and easy to replace, it might not be worth the extra cost every time.

If you choose to not add extra insurance, make sure to check out the coverage and terms and conditions of different carriers, and see which will best fit your needs.

✅ Checklist: Should I insure this parcel?

Use this quick list to decide:

• Is the item worth a lot?
• Is it fragile, unique, or difficult to replace?
• Is the parcel going abroad or outside your main market?
• Is it a time-sensitive or personalized order?
• Would refunding this order hurt your margin?
• Is customer satisfaction critical for this order?

If you answered yes to two or more questions, insure it!

What does shipping insurance cover (and what doesn’t)?

One of the biggest merchant frustrations with shipping insurance is not knowing what’s actually covered…until it’s too late. So let’s clear it up.

Below is a breakdown of what most third-party insurance providers cover:

✅ Typically covered

• Lost parcels during transit (e.g. missing scans, undelivered items)
• Damage in transit, such as:
  • Crushed packaging
  • Water damage
  • Broken contents (if properly packed)
• Theft, including packages that go missing after delivery
• Return shipping costs (if a product arrives damaged)
• Reshipping costs (if a replacement is needed due to loss or theft)

Policies usually cover up to the declared value of the item (sales or purchase price), depending on the provider.

❌ Common exclusions

• Damage before shipment (e.g. already broken or used items)
• Improper packaging (e.g. insufficient padding or unsealed boxes)
• Perishable goods (e.g. fresh food or flowers)
• Restricted items, which may include:
  • Jewelry
  • Antiques
  • Certain electronics (depending on provider)
• Illegal or prohibited items
• Duties or taxes related to return or replacement shipping

💡Pro tip: Before insuring high-value items, always check the provider’s full coverage terms. Some goods may be covered under specific conditions, like proof of value or proper packaging documentation.

How much is shipping insurance?

Shipping insurance is generally affordable, most providers charge between 1–2% of your parcel’s value.

That means insuring a €100 item usually costs around €1–2, while higher-value goods (like a €500 electronics order) might cost €5–10 to fully protect.

The final price can vary depending on:

• The value of the goods
• The destination (domestic vs international)
• The provider’s risk assessment
• Any additional services included (like faster claims or reshipping coverage)

Cheap shipping insurance? Watch the trade-offs

If a provider’s rates seem unusually low, make sure to check:

• What’s actually covered (some policies exclude theft or post-delivery loss)
• Claim speed (manual claims can drag on for weeks)
• Payout rules (purchase value vs sales value)
• Support access (is there someone to help when needed?)

Sometimes, paying a little more gives you faster refunds, fewer disputes, and better customer outcomes.

Try it yourself — Shipping insurance calculator

Want to know if insurance is worth it for a specific shipment? Use this calculator to estimate how much insurance might cost for a single parcel, value-based on an industry-average rate and Sendcloud’s Shipment Protection rates.

Carrier insurance vs shipment protection

Many merchants assume that shipping with a major carrier means automatic insurance. But what you’re actually getting is carrier liability—and it’s not the same as real coverage.

Let’s break down how carrier insurance works, where the gaps are, and how it compares to third-party or integrated solutions.

Carrier liability: What it really means

Carrier liability is a limited form of compensation based on weight, not value. It’s regulated by AVC or CMR rules in Europe, and it often looks like this:

• PostNL (NL): €3.40/kg domestic; EU shipments include €500 per shipment, Global Pack €200, with paid options up to €5,000
• DHL Parcel (NL/BE/DE): Standard liability up to €500 per shipment; optional insurance can raise coverage to €2,500 or €25,000
• DPD (DE/NL/BE): In Germany/Austria insurance up to €520 per parcel is standard; in the Netherlands compensation is €3.40/kg domestic or €10/kg international unless you buy increased liability to €520 per parcel or more
• UPS: Liability is €85 per shipment or 8.33 SDR/kg (≈€10/kg), whichever is higher; you can declare a higher value for a fee
• FedEx: Liability is limited by the applicable convention (e.g. 8.33 SDR/kg for road, 19 SDR/kg for air), or €3.40/kg up to €10 000 for ancillary services; you can declare a higher value for a fee (calculated per US $100) up to US $50 000 (US $100 000 for freight).
• La Poste / Chronopost (FR): Standard coverage is €250 per parcel (or €33/kg up to €1 000); certain professional services cap compensation at €23/kg up to €690; optional insurance up to €5 000 is available
• Correos (ES): Compensation is €6.67/kg plus postage (minimum €40); declared value or comprehensive insurance can boost coverage to €6 000
• BRT / Poste Italiane (IT): Base liability is €1/kg under Italian law, and BRT’s online service includes a flat €80 per shipment; optional insurance products offer higher limits (e.g., AC Base up to €6.20/kg)
• Austrian Post (AT): Business parcels include insurance up to €510 per parcel, with options to insure higher values

⚠️ Important: Most carriers don’t cover the full value of the item, and many exclude fragile goods, electronics, or theft after delivery.

Third-party and integrated shipping insurance

Unlike carrier liability, shipping insurance through third-party providers or platforms is:

• Based on declared value (not weight)
• Covers theft, loss, and damage — often including porch piracy
• Easier to manage across multiple carriers
• Typically faster for claims (digital submission, no paper forms)

💡 Example: Weight-based vs value-based refund

Let’s say you ship a €200 product weighing 1kg.

• Carrier payout (e.g. PostNL): ~€3.40
• Third-party insurance: Up to €200 (minus any excess)
• Integrated shipping insurance: Full sales value + reshipping, depending on policy

That’s a difference of €196.60 — enough to protect your margin and your customer relationship.

How shipping insurance works with Sendcloud

Once you’ve decided to insure your shipments, the next question is how to do it, especially if you’re using multiple carriers (which you should).

Sendcloud’s Shipment Protection, powered by XCover, makes it easy to insure parcels across 160+ carriers, all from one platform. It’s fully integrated into your label creation flow, so you can toggle insurance on per shipment—no separate tools, no extra steps.

What’s covered?

• Damage, loss, and theft (including after delivery)
• Return shipping (for damaged items)
• Reshipping (for lost or stolen parcels)
• Full sales value + shipping, up to €5,000 per parcel
• Hard-to-cover goods like jewelry and electronics are covered as well

Fast, digital claims

Claims are submitted via XCover, with most resolved in under a day. No waiting on carrier investigations—just a quick form and your refund is on the way.

It’s insurance built for e-commerce: flexible, automated, and always in sync with your shipping.

Seamless protection meets automated support

What makes Sendcloud’s Shipment Protection really different isn’t just what’s covered, but how easy it is to get help when things go wrong.

Because Shipment Protection and Support Automation are both part of the Sendcloud platform, you get a central overview of all issues, automated claims submission across 160+ carriers, and real-time updates—no more chasing emails or waiting weeks for answers. If there’s a problem, you and your customers know what’s happening at every step, with most claims resolved in a day.

In short: smarter insurance, and less support headache

Smart shipping means smart protection

Shipping issues happen. But revenue loss, refund headaches, and unhappy customers don’t have to.

By understanding the difference between carrier liability and real shipping insurance, you’re already ahead. And by choosing when and how to insure your parcels, you can protect your business without overspending.

Whether you’re shipping across borders, moving high-value goods, or just want fewer surprises—shipping insurance is a small cost that brings big peace of mind.

Want to protect your next shipment? Explore how Sendcloud’s Shipment Protection works and add peace of mind at checkout!

Frequently asked questions about shipping insurance