Should You Get Third-Party Insurance when Shipping Expensive Goods?

In case you run a business that regularly delivers to customers, particularly if you sell high-end items or sell in large volumes, shipping without insurance should not be in consideration. However, the automatic insurance provided by most major carriers is typically not enough to cover larger shipments or even the value of mid-tier goods. Third-party insurance exists to protect what basic carrier insurance does not.

This article will discuss how third-party shipping insurance differs from standard carrier liability and what its advantages are. We should note that the exact advantages of third-party shipping insurance depend on your particular insurance policy, but the general benefits are the same – the rest is nuances. In any case, we should start with the basics.

What Is Third-Party Insurance?

Shipping insurance is used to reimburse the sender in case their shipment was lost or damaged in transit. One option is to insure the shipment through the carrier. The other is third-party shipping insurance - when you insure your cargo through a company that is not your carrier. In other words, one company is shipping your items, while you buy shipping insurance from a third party.

Advantages of Third-Party Shipping Insurance

Buying shipping insurance from a third-party insurance provider has 5 primary benefits: 1. the insurance rates are typically cheaper; 2. higher insurance limits are possible; 3. more types of goods are covered; 4. more causes of loss or damage are covered; 5. filing and processing claims is usually quicker and easier.

Let us expand on each point.

Discounted Rates

Once again, the exact insurance rates will vary based on your provider, but insurance companies offer specific policies where it is possible to negotiate discounted rates, particularly for bulk or frequent shippers. For relatively cheap shipments, e.g. up to $100 in value, there is usually no reason to get third-party insurance.

Most carriers provide built-in insurance (the carrier’s liability) for goods of up to $100 and offer to sell additional insurance for more expensive items. However, the insurance rates rise the more expensive the shipment is. The same is often true of third-party insurance providers, but because these companies specialize in insurance, they offer discounted policies when certain conditions are met.

Consequently, third-party shipping insurance is proportionally cheaper than carrier insurance the more expensive the shipment.

Higher Insurance Coverage Values and Full Reimbursement

Third-party insurance providers can offer you full-value coverage for the most expensive packages. Carriers limit the upper value of items they are willing to insure. While third-party providers also have upper limits, they are set higher – companies specializing in high-end items may set the upper limit as high as $150,000.

Then, even when you buy additional shipping insurance that covers the value of your goods from carriers, it still does not mean that you will be fully reimbursed in case of loss or damage. Many carriers will only reimburse you for the repair or replacement cost, or the depreciated value of the item – usually whichever is the lowest. Third-party companies will reimburse you for the full value of the item.

Wider Coverage

Besides the higher values that can be covered by third-party insurance, it also covers more types of goods. Again, the specific types of goods that are covered will depend on your insurance policy and some items will always be excluded. For example, you will never be able to insure items that are illegal to ship (not illegal items per se, but illegal to ship).

Further, most carriers will not insure items like art, alcohol, medical equipment, many types of electronics, or collectibles. Neither will many private insurance companies, for that matter. However, based on your business, you can find companies that provide industry-specific policies that will cover the types of goods you deal in, thus your shipment can be insured.

Broader Liability

One of the main benefits of third-party insurance is that you are much more likely to be reimbursed when your packages are lost or damaged. After all, insurance does not have a purpose if your claims are rejected. With many third-party shipping insurance policies, you only need to prove that your goods were lost or damaged for your claim to be accepted.

With insurance provided by carriers, their liability is narrower. You would need to prove that your carrier was at fault for the items getting lost or damaged, or they cannot be held liable. That means that you are not covered in some of the most common causes of loss – like natural disasters or shipwrecks.

Easier Claims Processing

Finally, private insurance providers strive to make filing and processing claims as simple as possible. Their business model depends on expediently processing insurance claims so that both you, as the sender, and your customer can continue with business as usual. Carriers generally do not have such an impetus, which can severely complicate the claims process.

Typical Differences between Third-Party Insurance and Carrier Liability

Let us sum up the differences between third-party insurance and the insurance provided by carriers:

Is Third-Party Insurance Always Necessary?

Finally, we should discuss if third-party insurance is always necessary, even with the listed benefits. And the answer is – no. It is highly advisable to get private insurance in case your business regularly sends luxury items. On the other hand, if your shipments are never over $100 in value, there is no reason not to utilize the free carrier liability that is provided.

Do You Need Third-Party Shipping Insurance?

UNIVAL Logistics provides end-to-end logistics solutions and specializes in insuring high-value items. You can insure your packages for up to $150,000 and $100,000 for domestic and international shipments, respectively.

We offer industry-specific policies at premium rates and will insure anything from collectible coins to expensive electronics. On top of that, we provide real-time tracking of your shipments and you can integrate your business’ functionalities with our API for easier management.

Contact us to get your insurance quote and see how we ease the burden of transport.