The difference is simple: with self-funded shipping protection, your store keeps the fee and pays the claims. With third-party (provider-funded) protection, the provider keeps the fee and pays the claims. Everything else, from cash flow to customer experience, follows from that one choice.
New to the topic? Start with what shipping protection is.
How do the two models compare?
| Self-funded | Third-party (provider-funded) | |
|---|---|---|
| Who keeps the fee | Your store | The provider |
| Who pays claims | Your store, from the fees | The provider |
| Who decides claims | You, with your rules | The provider, with its terms |
| Brand on the claim experience | Yours | Usually the provider’s |
| App cost | A monthly plan or revenue share | Often free to install |
| Your upside | Fees minus claims | None from the fee |
| Your downside | A bad month of claims | Less control over customer outcomes |
How does the money work in each model?
Take a store with 1,000 orders a month. Half of customers add a $3 fee, 1.5% of protected orders end in a claim, and each claim costs $45 to resolve. These are example numbers; use your own.
| Line | Self-funded (Sam) | Third-party |
|---|---|---|
| Fees collected | $1,500 to you | $1,500 to the provider |
| Claims paid | −$338 by you | Paid by the provider |
| App cost | −$9 | $0 |
| Your monthly result | About $1,153 | $0 |
The self-funded store also carries the risk of a bad month. If claims double, it still keeps about $816. If they rise tenfold, it loses money that month. That is why pricing from your real claim rate matters.
What about cash flow?
With a self-funded app, protection fees arrive with your Shopify payouts, before most claims come in. You pay claims later, as refunds, reships or store credit. That timing means the fees are usually in your account before you need them.
With a third-party app, the provider collects the fees. Depending on the provider, that can be invoiced to you after customers pay, so check how and when you are billed.
How does each model affect the customer experience?
Customers notice who handles their claim:
- Self-funded: the claim page, emails and decision come from your store. You can reship the same day, offer store credit, or make an exception for a loyal customer.
- Third-party: the provider’s process applies. That can be fast and polished, but you have less say in edge cases, and the customer may deal with a company they did not buy from.
Which model should you choose?
Answer these four questions:
- Do you know your loss rate? If you can count last quarter’s lost, damaged and stolen orders, you can price self-funded protection. If not, start tracking now.
- Do you want the fee as revenue? If yes, self-fund.
- Do you have time to review claims? Often a few minutes a day for a small store. If not, a third-party provider removes that work.
- How expensive are your products? For very high-value items, consider self-funded protection plus insurance or declared value on the priciest parcels. See shipping insurance vs shipping protection.
If you already handle customer service in-house, self-funding is usually a natural fit. Compare apps in our best shipping protection apps roundup, or run your numbers in the shipping protection calculator.
How do you move to self-funded protection?
- Count 90 days of lost, damaged and stolen orders and their cost.
- Set your fee with our guide on how much to charge for shipping protection.
- Install a self-funded app such as Sam Shipping Protection and publish your claim rules.
- Turn off the third-party widget so customers only see one offer.
- Review fees against claims after the first month and adjust.
Frequently asked questions
What does self-funded shipping protection mean?
Your store sells protection to customers, keeps the fee, and pays for lost, damaged or stolen orders itself. An app such as Sam provides the widget, pricing rules and claims page; no third party takes a cut.
Is self-funding shipping protection risky?
The risk is a bad month where claims exceed fees. Price the fee from your own claim rate, add a margin, and review fees against claims monthly. Over time, the fees from orders without problems cover the ones that go wrong.
Can I switch from third-party to self-funded protection?
Yes. Install a self-funded app, set your price and rules, then turn off the old widget. Orders placed before the switch stay with the old provider.
Part of our guide: Shipping protection →