The stakes have never been higher. In a world where over 1.7 million packages are lost or stolen each day in the U.S. alone1, protecting your supply chain and your customers’ experience is the key to business resilience and brand credibility.
While many logistics teams often rely on insurance from their carriers, forward-thinking organizations are switching to third-party solutions that reduce costs by up to 90% while providing stronger protection and operational flexibility.
In this article, we’ll dive into what shipping insurance covers, how it works, why it’s a cost-effective choice, and most importantly, how integrating the right insurance solutions into your shipping workflow can reduce risk and drive better outcomes.
Shipping insurance is designed to protect the value of packages while they’re on the move, in case they get lost, damaged, or stolen. It guarantees that you’ll be reimbursed for the insured amount if anything goes wrong during shipping, whether it’s across states or oceans.
It’s important to understand that not all insurance is created equal. While most carriers provide some form of insurance, their offerings often come with limited coverage, slow claims processing, and higher costs, especially for businesses that ship in large volumes. That’s why many companies are turning to third-party insurance providers, who deliver more flexible, affordable, and scalable solutions tailored for operations that rely heavily on logistics.
To help clear things up, let’s take a look at a side-by-side comparison of insurance provided by carriers versus third-party shipping insurance:
| Feature | Carrier-Provided Insurance | Third-Party Insurance |
| Coverage Scope | Limited; often excludes certain items, capped amounts, and may not cover all risks (e.g., porch piracy, perishables). | Broader; covers more scenarios (lost, damaged, porch theft, international, high-value items) and offers customizable policies. |
| Cost | Higher; typically 2-3% of shipment value, with minimum charges and fees for higher-value items. | Lower; often 1% or less of shipment value, savings up to 90% compared to carriers. |
| Claims Process | Slower; can take 2-4 weeks or longer, more documentation, and stricter requirements. | Faster; many claims resolved in 7-10 business days, streamlined online portals, less red tape. |
| International Flexibility | Limited; some destinations not covered or require premium services. | High; can insure shipments to more countries, including those not covered by carriers. |
| Payout Amount | May not cover full value; based on declared value, possible exclusions, and caps. | More likely to pay full replacement value, including shipping and sometimes a markup. |
| Integration & Automation | Basic; often manual process, limited integration with shipping platforms. | Advanced; can automate rules and integrate with shipping platforms. |
Third-party shipping insurance providers typically offer broader and more flexible coverage than standard carrier policies, including protection for:
Depending on how your business operates and the types of shipments you handle, you might also be able to expand your coverage to include:
These additional protections typically require a custom agreement or policy endorsement, but don’t worry—the process is usually straightforward. You’ll just need to provide a brief overview of your shipping volumes, the types of items you send, and your average order value.
While insurance coverage can be extensive, it does have its limits. Here are some common exclusions you might encounter:
That being said, many insurance providers are willing to offer custom coverage endorsements to fill these gaps. For instance, some plans can cover porch theft or temperature-sensitive items with just a few extra conditions. This kind of flexibility is perfect for businesses shipping across diverse product categories.
Today’s eCommerce and fulfillment ecosystems demand speed, scale, and customer satisfaction. That makes any shipping mishap a major liability.
Consider the following:
The true cost of a lost or damaged package goes beyond just the item itself. It also includes shipping fees, the labor to replace it, customer service expenses, and even the potential sales lost from a bad customer experience.
In many cases, a single shipping incident can cost two or three times the item's value. When you think about thousands of orders each month, it’s clear that shipping insurance isn’t just a backup plan but a smart strategy for success.
Modern shipping insurance solutions are designed to integrate seamlessly with your existing shipping platforms. If you're using a solution like techSHIP by Techdinamics, the process can be fully automated and rule-driven.
Work with your fulfillment or logistics partner to evaluate shipping insurance programs that align with your risk profile, average order value, and shipment destinations.
Decide whether insurance should apply to:
Automating these rules reduces errors and simplifies your internal process.
Most third-party insurance providers offer a user-friendly claims portal, allowing your team to:
Many claims are resolved in 7–10 business days, far faster than the 2–4 weeks typical of major carriers3.
At Techdinamics, we work with a wide variety of 3PLs, brands, and retailers who collectively ship millions of packages per year. As they grow, their approach to insurance also adapts. Here’s what we’re noticing:
Customers today expect fast, frictionless resolutions. Shipping insurance empowers companies to confidently refund, replace, or reship orders—without the hassle of internal discussions or budget concerns.
By leveraging techSHIP’s millions of annual shipments and its partnerships, companies can unlock deeply discounted third-party insurance rates, often 50% to 90% lower than standard carrier pricing. For a business shipping 10,000 packages monthly at $500 average value:
| Insurance Model | Cost per $100 | Annual Cost | Savings |
| Carrier (UPS/FedEx) | $2.70 | $1,620,000 | - |
| Third-Party | $0.49 | $294,000 | $1.32M |
These savings can significantly boost profit margins or be reinvested to enhance customer experiences.
Business leaders crave data. Look for providers that offer claim performance metrics, so you can monitor trends, spot recurring issues, and optimize your packaging or carrier mix accordingly.
With tools like techSHIP, companies can set up “insurance rules” that automate which packages are insured and how. This eliminates repetitive tasks and ensures consistency across teams and locations. Plus, features like Cartonization and Smart Packing help you properly pack orders so they are less likely to be damaged in the first place.
In a world of next-day delivery expectations and razor-thin margins, protecting your shipments is more than just risk mitigation. It’s a competitive advantage.
Third-party insurance helps your team:
At Techdinamics, we’re on a mission to make the shipping experience smarter. That's why we’re actively expanding our Shipping Programs to include a range of reliable, cost-effective partners. One such example is U-PIC Shipping Insurance, known for its competitive rates and speedy claim resolutions.
Stay tuned as we roll out additional integrations designed to give your team more choice, control, and coverage.
1 Security.org – "2024 Package Theft Annual Report and Statistics”
2 New York Post – "85 million damaged packages arrived on doorsteps last year — and the number is soaring, troubling study shows"
3 Based on third-party insurance provider benchmarks, including U-PIC.