Every shipper knows that sometimes a package gets lost, broken or even stolen in transit. Naturally, supply chain managers want to claim refunds for those packages. So when they see a recommendation from their carrier to “add extra coverage,” it feels like a no-brainer.
Often, these prompts are encouraging shippers to sign up for Declared Value Coverage. Although it sounds like it, declared value coverage is not insurance coverage. It simply sets a carrier’s maximum liability claim for any total loss or damage that may occur to the parcel.
Essentially, declared value coverage allows shippers to declare the value of shipments before they move. When shippers do this, it increases carriers’ financial legal liability above their existing limitation. It doesn’t increase carrier liability — but it does allow shippers to recover more of their loss or damage costs.
Because declared value coverage is confusing, carriers may charge shippers more than they need to — assuming shippers won’t notice. The maximum liability set by carriers may be much higher than shippers actually need to cover the value of their goods.
If you ship goods through a third-party shipping logistics company make sure you’re not paying for more coverage than you need. It is also common for a third-party insurance company to charge a premium price for the insurance policy they can offer.
FedEx Declared Value Coverage
If shippers do not have declared value coverage from FedEx, the maximum liability the company will accept is $100.
For U.S. Express service, FedEx charges $3 for coverage of shipments worth between $100 and $300. For International Express, it asks $1 per $100 of value above $100.
For Ground — both U.S. and International — FedEx charges $1 for every $100 of declared value for shipments worth more than $300.
FedEx also requires a direct signature for a parcel that is worth more than $500.
On items of “extraordinary value,” declared value is limited, and it depends what the shipment is and where it’s going. This type of coverage is designed for artwork, antiques, film and photos, jewelry, precious metals, furs and other high-value items.
UPS Declared Value Coverage
UPS, too, sets its maximum liability for lost or damaged packages at $100. If shippers don’t declare a higher value that they want covered, UPS will not accept any further liability.
For packages with declared values of higher than $100, UPS charges $0.90 for every $100 of declared value coverage. The minimum charge is $2.70, which would cover a shipment worth $400.
For international shipments with declared values higher than $50,000, UPS charges $0.009 multiplied by the declared value.
UPS claims restrictions on certain items. For lost checks, phone cards, tickets, gift cards, and the like, UPS will not reimburse the value of those items — it will merely cover the cost of stopping the check or replacing the physical card. If media, like documents, film or photographs, are lost, UPS will cover only the costs of the paper or the memory cards. And for antiques and specialty items, shippers must provide proof of value, such as an appraisal.
UPS claims also says it will deny for “insufficient packaging” — unless the item in question was packaged and shipped at a UPS Store. In that case, shippers will be “reimbursed the item’s value (subject to the lesser of the actual value, replacement or repair cost), the cost of packaging materials and service as well as the shipping costs (excluding declared value charges).”
What This Means For Shipping-Based Companies
In order to know how much declared value coverage you need for a package— or whether you need it at all — it’s essential that shippers accurately calculate the value of their shipments. You likely want some coverage, but paying for more coverage than you need is a waste of resources.
To find out how much you’re spending on declared value coverage, turn to a shipper’s most valuable resource: Your invoices. These documents, long and convoluted as they are, are packed with information about what exactly your carrier is charging you for. How much did you spend on declared value coverage last month? Does that match what you thought you were spending? And does it provide you with the coverage you need?
Auditing your invoices regularly is critical, but it can require hours every month — hours that many companies just can’t spare. That’s why Reveel exists. We can audit shippers’ invoices while they focus on improving their own supply chains. This customized, 45-point audit can highlight refund opportunities shippers didn’t realize they could claim.
Audits can also show shippers where they’re consistently spending more money than they should, such as surcharges they should try to avoid. Our experts can also review your declared value coverage and calculate whether it’s accurate or much more than you need.
Even if it seems like it’s only a few dollars a month, those dollars add up — and we can help you rigorously identify and eliminate those wasteful spends.