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How Does UPS Insurance Work?

Insurance form

Shipping insurance protects the shipper from losses in case goods are stolen, damaged or destroyed. Every shipment faces these threats, not just fragile goods — handlers may not be as careful as you hope; your packaging may not hold up the way you expected; the vehicle carrying your package could crash; the warehouse housing it could have a fire. Sometimes thefts occur along the supply chain or from buyers’ doorsteps.

For all those reasons, it’s important for shippers to have some kind of coverage on packages worth more than a certain amount.

Third-party shipping carriers usually offer declared value coverage themselves, often including a certain amount in general shipping contracts. UPS contracts cover packages worth up to $100. For large loads, carriers will typically offer cargo insurance for an additional fee; smaller loads often carry parcel coverage at the package level. However, declared value coverage is not insurance; it will only pay out if the carrier is proven to be responsible for the damage.

In addition to declared value coverage, UPS offers Flexible Parcel Insurance and other types of true insurance policies. Third-party insurance is available, too, and may be useful for particularly valuable items.

How Does Declared Value Coverage Work?

If you have declared value coverage and your package’s value is below the threshold covered by your carrier, you’ll need to file a claim. Typically, this includes providing both proof of loss and proof of value.

To prove loss, for instance, damage to a package might need to be reported when the recipient signs for the package, or you may need to provide proof that the package was picked up from your facility but the delivery was not completed. Proof of value is usually based on the purchase price.

As with all parts of your shipping contract, it’s wise to review your carrier’s policy — and make sure it applies to the packages you want it to cover.

UPS Declared Value Coverage Basics

What does UPS declared value coverage include?

Up to $100 in value, packages are automatically covered. This no-cost coverage can help shippers recoup the value of many packages.

However, if shippers don’t declare a higher value for a package, UPS will not accept any further liability. If you want more coverage from UPS, you’ll need to purchase declared value coverage.

UPS, like many carriers, offers declared value coverage in shipping contracts. It’s important to note that declared value coverage is not technically insurance — it simply sets a carrier’s maximum liability claim for any loss or damage that occurs in transit. With declared value coverage, shippers get to declare the value of shipments before they’re picked up. This increases carriers’ financial liability above existing limits, allowing shippers to recover more of their loss or damage costs.

Then, if the parcel is lost or damaged, declared value coverage pays out the cost of repairing or replacing the merchandise. UPS usually offers repair quotes itself, though shippers can obtain independent repair evaluations if desired. If that third-party reviewer says the merchandise cannot be repaired, the shipper can file a claim for the replacement value of the item in question, up to UPS’s maximum liability.

UPS can deny declared value coverage claims. For example, the company says it can deny claims for “insufficient packaging” unless the item in question was packaged and shipped at a UPS Store.

How much does UPS declared value coverage cost?

For packages worth $100 or less, UPS coverage is included in most shipping contracts free of charge. Remember, that covers only the value of the item, not the cost of packaging or shipping itself.

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 $300. Coverage maxes out at a value of $50,000 per package or $100,000 per pallet.

For international shipments with declared values higher than $50,000, UPS charges $0.009 multiplied by the declared value.

FedEx, for comparison, also sets a maximum liability of $100. Additional declared value coverage costs $3 for all shipments on U.S. Express with values between $100 and $300, which is more expensive than what UPS offers. International Express costs only $1 per additional $100 of coverage, but that is still more expensive than UPS.

What are UPS Insurance Options?

For shippers seeking true insurance rather than declared value coverage, UPS Capital — a division of UPS — offers Flexible Parcel Insurance.

Ironically, perhaps, UPS Capital insurance markets its policies to shippers “weary of being ‘denied’” when they file declared value claims. An insurance policy will pay out regardless of whether damage to a package was the fault of the carrier, which usually must be proven in order to claim declared value coverage.

These policies can cover parcels shipped with any carrier, not just UPS, and include both parcel and cargo options.

What does UPS insurance cover?

UPS insurance works like a true insurance policy, meaning the insurance provider will pay out the full value of a lost or damaged package without the shipper having to prove that the carrier was liable.

Policyholders have wider latitude to define their insurance coverage than they do with declared value coverage. Insurance options include basic insurance for small packages, coverage for items that are excluded from declared value coverage, and time-in-transit coverage for perishable goods.

Who should use UPS insurance?

For many shippers, declared value coverage may be sufficient — either the $100 of coverage included in your contract or any additional coverage you wish to purchase. However, it’s essential to note that declared value coverage is not insurance. Shippers have to provide proof of loss and proof of value to file claims with UPS, and even then, the company may deny their claims.

UPS does offer a true insurance option via UPS Capital. These policies offer shipments broader coverage, and they are more likely to pay out greater sums of money when parcels get lost or damaged. At the same time, these insurance policies are likely to be more expensive than declared value coverage — UPS Capital does not publish its insurance rates online, suggesting they are negotiated individually with shippers depending on their needs.

What type of UPS insurance coverage is best for you? Talk with an expert at Reveel about your needs, and we can help point you in the right direction.