Shipping Insurance Cost Calculator

How it is calculated

Shipping insurance is normally priced per hundred dollars of declared value, with a minimum charge. Carrier-provided cover typically runs $1.05 to $1.75 per $100 above an included amount, and third-party insurers commonly charge $0.55 to $0.90 for the same cover.

The decision is a straightforward expected-value comparison: premium paid across all shipments against the loss rate times the value at risk. Insurance wins only when the premium is below the expected loss, and for most ecommerce parcels it is well above it.

The same thing with real figures

A $58 order with $100 of included cover needs no additional insurance at all, which is the case for the large majority of consumer parcels.

Now a $600 order. Carrier insurance above the included $100 at $1.40 per $100 is $7.00. Across 200 such orders a month that is $1,400.

The loss rate on domestic ground parcels runs around 0.3% to 0.5%. At 0.4%, expected losses are 0.8 parcels a month at $360 of cost, $288. The insurance costs $1,400 to cover $288 of expected loss, so self-insuring saves roughly $1,100 a month at the cost of accepting variance.

The catch

The comparison should use your cost of goods, not the retail value. A lost $600 order costs the cost of goods plus the shipping plus the replacement shipping, not $600, and insuring for retail value overinsures by the whole margin.

Claims also have a real administrative cost and a real failure rate. Carriers deny claims for insufficient packaging, missing documentation and late filing routinely, and a policy whose claims are half denied is half the cover it appears to be.

Applying it

Set a value threshold and insure only above it. Below the threshold, self-insure and treat replacements as a cost of doing business, which is what the arithmetic supports for nearly all consumer-value parcels.

Use third-party insurers rather than carrier cover for the shipments you do insure. The premium is typically 40% to 60% lower for equivalent cover, and the claims process is often better rather than worse.

What the carrier's included cover actually covers

The included liability: commonly $100. Is a limit on the carrier's liability, not an insurance policy, and it pays only on proof of the carrier's fault. Damage attributed to inadequate packaging is excluded, and the carrier decides what counts as adequate.

That exclusion is the one that catches sellers out. A fragile item packed in a box without sufficient void fill will have a damage claim denied regardless of the declared value, and the packaging standard the carrier applies is stricter than most sellers assume.

There is also a category of goods excluded from cover entirely or capped very low: jewellery, precious metals, currency, and in many cases anything second-hand or of collectible value. Sellers in those categories need specialist cover, and discovering the exclusion at the point of claim is the expensive way to find out.

One practical note: whatever the insurance decision, the replacement policy the customer sees should be the same. Telling a customer their lost parcel is not covered is a support conversation no seller wins, and the cost of simply replacing it is already in the arithmetic above.

Self-insuring is a decision about who carries the risk internally, not about what the customer is entitled to, and conflating the two turns a small operational saving into a reputational cost that is much larger.