Shipping insurance pays you back after a lost or damaged parcel, once you file a claim with an insurer or carrier. Shipping protection is a fee your customer pays at checkout so your store fixes their order fast. One protects your costs; the other protects the customer experience.
Here is the side-by-side, then how to decide. For the full background, see our shipping insurance guide and shipping protection guide.
What is the difference at a glance?
| Shipping insurance | Shipping protection | |
|---|---|---|
| Who pays | The merchant (or included with some labels) | The customer, as an optional fee |
| Who is paid | The merchant | The customer gets a refund, reship or store credit |
| Who files the claim | The merchant, with the insurer or carrier | The customer, with the store (or provider) |
| How fast the customer is helped | Often waits on the claim | Fast: the store decides |
| Covers “delivered but not received” | Often not | If your rules say so |
| Effect on your margin | A cost | Self-funded: the fee is revenue |
How does shipping insurance work?
You add coverage to a shipment, either by buying it with the label or through a policy. If the parcel is lost or damaged, you file a claim with evidence such as tracking and proof of value, and the insurer or carrier pays you.
Some coverage may already be included. For example, Shopify includes up to $200 of insurance on eligible labels for stores on the Grow, Advanced or Plus plan with Shopify Payments active. Carriers such as UPS and FedEx include $100 of liability, which they state is not insurance.
How does shipping protection work?
A widget at the cart, checkout or thank-you page offers protection for a small fee. Customers who add it pay with their order. If something goes wrong, they file a claim through your claims page and you refund, reship or give store credit, under the rules you published.
With a self-funded app such as Sam Shipping Protection, you keep the fee and pay claims yourself. With a provider-funded app, the provider keeps the fee and pays claims. Sam is not an insurance provider; it gives you the tools to run your own protection program.
When should you use each one?
- Use shipping protection when you want customers helped quickly, want to cover porch theft and “delivered but not received” cases, or want the fee as revenue.
- Use shipping insurance or declared value when a single lost parcel would hurt, such as jewelry or electronics, and you want to recover the replacement cost.
- Use both when you sell a mix: protection for every order, insurance for the expensive ones.
A quick test: if you would never bother to file an insurance claim for an order, protection is the better fit for it. Run your numbers in the shipping protection calculator.
What do merchants get wrong?
- Calling protection “insurance”. If you run a self-funded program, you are not an insurer. Call it shipping, package or order protection.
- Making the customer wait on an insurance claim. Fix the order first, recover the cost later.
- Assuming carrier coverage is enough. Default liability is limited and often hard to claim when tracking says “delivered”.
- Paying for insurance on cheap parcels. Below the included coverage, extra insurance can cost more than it saves.
Frequently asked questions
Is shipping protection a type of insurance?
Not necessarily. Self-funded shipping protection is a promise from the store to its customer, paid for by an optional fee, with no insurer involved. Some provider-funded programs are backed by insurance; check each provider's terms.
Which is cheaper for a merchant?
Shipping insurance is a cost you pay per parcel unless some is included with your labels. Shipping protection is paid by customers who choose it, so with a self-funded app it can earn more than it costs.
Can I offer both?
Yes. Many stores offer protection to customers and insure or declare value on high-value parcels, so the customer is helped fast and the store can still recover large losses.
Sources
Part of our guide: Shipping insurance →