When running an e-commerce store on Shopify, your goal is to offer a seamless and trustworthy experience from checkout to delivery. But what happens if a customer's package gets lost, stolen, or damaged during transit? This is where shipping insurance comes into play and it's a key tool in protecting your business and customer satisfaction.
In this post, we'll explain what shipping insurance is, how it works when using Shopify, when you need it, and how to choose the right coverage for your store.
What is shipping insurance?
Shipping insurance protects the value of your shipped goods in the event of loss, theft, or damage during transportation. If an insured shipment encounters an issue, you can file a claim and get reimbursed for the declared value of the item.
Without insurance, you risk absorbing the cost of lost or damaged goods or having unhappy customers who don’t get what they paid for.
What does shipping insurance cover?
Most shipping insurance policies cover:
- Lost shipments
- Damaged items
- Stolen packages (depending on terms)
- Delivery failures due to carrier error
Coverage can vary depending on the carrier and insurance provider, so it's important to read the fine print.
Do you need shipping insurance on Shopify?
Not every shipment needs insurance but it's often worth it when you're:
- Shipping high-value items
- Fulfilling international orders
- Using carriers with inconsistent delivery performance
- Wanting to offer customers peace of mind
Many Shopify merchants use insurance as a way to protect their profit margins and reduce refund-related losses.
How does shipping insurance work on Shopify?
When you create a shipping label through Shopify Shipping (available in supported countries like the U.S., Canada, and Australia), some carriers offer built-in insurance for up to $200.
If you want to insure shipments beyond this value, Shopify gives you the option to add shipping insurance during label purchase (powered by Shipsurance or similar partners). You can choose the coverage amount based on the value of the order.
After a package is lost or damaged, you can submit a claim through Shopify Admin and upload required documentation to receive a reimbursement.
Shipping insurance with Packrooster Shipping
If you are using a third party shipping app like Packrooster Shipping you can add shipping insurance directly to your shipping rates if your selected carrier offers it.
For example UPS offers insurance to your shipments as an additional service. You can choose how much of the order value you want to insure. You can insure up to 100% of the order value.
How much does shipping insurance cost?
Shipping insurance is typically affordable and based on the declared value of the goods. While rates vary by provider, you can expect to pay:
- Around $0.75–$2.00 per $100 of coverage
- Higher rates for international or high-risk destinations
Some third-party services also offer bulk insurance plans or e-commerce integrations that reduce the per-shipment cost.
Pros and cons of using shipping insurance
Pros:
- Reduces risk of financial loss on lost/damaged shipments
- Builds customer trust with faster resolution
- Useful for high-value or international orders
Cons:
- Additional cost per shipment
- Claim processing can take time and documentation
- May not cover every scenario (e.g. porch piracy)
Best practices for Shopify merchants
If you're considering adding insurance to your Shopify shipping process, here are a few tips:
- Evaluate the average order value – Insurance makes more sense for high-ticket items.
- Inform your customers – Let them know orders are insured; it builds trust.
- Streamline your claims process – Use apps or systems that make it easy to file and track claims.
- Review your shipping carrier's policies – Know what’s covered by default and what needs to be added manually.
Shipping insurance on Shopify is a smart, cost-effective way to reduce risk and keep your customers happy - even when things don't go as planned. Whether you're fulfilling orders locally or globally, having a backup plan helps you handle shipping issues quickly and professionally.
