If the thought of sending damaged, missing, or totally lost orders agitates you, shipping insurance just might be what you need.
While most shipments typically arrive at their destinations on time, on target, and in good condition, as we all know, there is still plenty of exposure to risk when it comes to shipping goods all over the world.
Nowadays, consumers are increasingly getting used to buying high-value goods through eCommerce platforms, which makes a potential loss to be surely an unpleasant experience for all parties involved that will not leave your company without a reputational blemish.
If the thought of sending damaged, missing, or theft of your product due to circumstances out of your control at the hands of your third-party service provider, then shipping insurance might just be what you need.
A Quick Rundown on Shipping Insurance
Shipping insurance is a policy that a shipper may opt to purchase in order to get a reimbursement of expenses for shipments that are lost, damaged, or stolen while being transported to its receiver with a courier.
It is typically offered through third-party vendors or couriers upon shipment, with costs that range depending on the declared amount and value of the goods being transported.
Shipping Insurance 101
What does shipping insurance typically cover?
In general, global couriers cover shipments with up to $100. The United States Postal Service (USPS), meanwhile, provides only $100 coverage for their Express Mail services.
However, it must be noted that these are coverages stemming from declared value and not insurance.
These declared values for packages are basically the company’s maximum liability in the case of loss, damage, misplacement, or theft.
Additionally, further shipping insurance is required if you wish to insure your shipments over the declared value with various couriers. You must declare if the value of your shipment is above $100 if you are a seller.
Who Buys Shipping Insurance? Is It the Buyer or the Seller?
Generally, the burden of shipping insurance lies with the seller due to their responsibility for handling a product until it is delivered to the buyer.
Sellers have more incentive for providing a layer of security via shipping insurance. That’s because they risk financial loss.
In certain situations, however, the buyer may opt to purchase shipping insurance as well, if they for instance live in an area where it is less safe to deliver packages.
Read the Fine Print
Once you decide to purchase shipping insurance, it is critical to familiarize yourself with the terms and conditions.
Claims may be denied when a courier doesn’t explicitly cover a particular event.
For example, the shipping insurance policies of UPS, FedEx, and USPS, as of this writing, do not offer coverage for coins, cash, or precious stones. Certain couriers may also lack coverage for particular destination countries.
Shipping insurance coverage may also be limited for certain high-value products.
Lastly, sellers should take note of how well their products are packaged. Claims may be denied if the insurance provider rules that your shipment was improperly packed.
Got a Claim? File Them Now!
Once you receive news that your shipment has been stolen, damaged, or lost, it is highly advisable to file the claim as soon as possible. Know your courier’s cutoff times for claims filing.
Patience is the Key
Shipment insurance does offer benefits. However, there will be a need to wait when claiming a reimbursement at times.
Typically, it takes 7 to 10 business days to process a claim for a lost package. If the package still cannot be located, then an authorization letter is sent as well as some supporting documents. Once the documents are received by the courier, it takes 3 to 5 business days to resolve a case.
Yet another choice you can consider is a third-party insurance company that may offer discounted shipping insurance rates with often faster claims processing.
3 Important Benefits of Shipping Insurance
1. Shipping Insurance Gives You an Extra Layer of Security
Running your business already is a chore and a half. If you could worry less about ensuring the safety of each shipment you send out, shipping insurance can provide you the peace of mind you crave.
2. Shipping Insurance Saves the Time and Bother of Replacement Costs
The burden will be in your hands if something happens to your package when it’s uninsured. Parcel insurance saves yourself the time and bother by shifting the responsibility of protecting your shipment by the insurer himself.
3. It’s Easy to Get Shipping Insurance
You don’t have to jump through hoops to add shipping insurance for your package. You can pay for it right when you pay for shipping so it can be added as part of your overall shipping price.
What are the risks of shipping without a shipping insurance?
The main risk of going without shipping insurance is going to be the cost of sending a replacement product to the customer. While this not might harm the bottom line on lower-value goods, it can add up if you ship in high volumes or your products are of high value. You will have to calculate shipping errors into your loss prevention strategy.
Should I Get Shipping Insurance?
Each eCommerce business is different, so there’s no one size fits all answer. In general, sellers that buy shipping insurance tend to ship in high volumes or have high-value products, such as jewelry, art, apparel or electronics. In these cases, the cost of replacing missing or damaged products can add up and eat into profits. Purchasing shipping insurance provides of peace of mine and allows for more predictable loss prevention costs.
International shipping creates risks as well due to the wide variety of couriers and geographies covered. There will be locations where delivering packages is less reliable and there’s a higher chance that a package will get lost, stolen or damaged.
How Can Odoo Help Integrate Landed Costs in Product Costs?
eCommerce startups and small to medium-sized enterprises who are interested in opening an import and export business, the arithmetic you need to figure out how to make a profit isn’t always cut-and-dried.
It goes without saying that costs for importers and exporters go way beyond just purchase price and shipping costs. Rather, today’s businesses need to address the problem of a wide array of fees combined to form what is known as the “landed cost”.
What are landed costs?
Landed costs of imported items represent the total cost of purchase, and transport from its origin country to its destination market. A whole slew of fees make up the landed cost, and the calculation typically breaks down this way – including shipping insurance, as we will see.
- Purchase Price. Purchase price represents the agreed item cost between the buyer and the seller.
- Freight. Freight covers not only transportation via road, rail, air, or sea, but also from obtaining the item itself from its warehouse to the exact port its going out of. Landed costs generally include all fees up to the port of destination, so carriage fees from the port of import to its final delivery location are no longer included.
- Loading. Loading and unloading fees may be charged between truck and ship at the exporting port.
- Shipping Insurance. Shipping insurance depends largely on the contract and the arrangement. The buyer or the seller takes on the responsibility of any lost, stolen, or damaged items in transit, and therefore in many cases shipping insurance for imported goods is certainly something to consider. If the buyer bears the responsibility for lost or damaged goods, then the shipping insurance fees become part and parcel of the landed costs.
- Any Customs Duties or Taxes on Importation/Exportation. Generally, most taxes and fees at the port of import that are imposed by the destination country are included as part of the landing costs. In other less common arrangements, the buyer may cover export duties in the originating country.
The arrangements set forth on the contract determines how the buyer and seller split up the fees.
Now, let’s take a look at how Odoo, an ERP solution that we at Syncoria specialize in, can make it simpler for you to integrate landed costs (including shipping insurance charges) in product cost.
Overview on Odoo
In general, landed costs include = product cost + shipping costs + customs charges + risk.
While each of the components that make up the above equation may not be applicable on every shipment, relevant components must be included as part of the landed costs.
Landed costs need to be identified in order to determine what your actual product’s sale price is going to be because it will make a serious impact on revenues.
Applications configuration on Odoo
It’s really simple to activate landed costs on Odoo. Just go to Odoo Inventory ‣ Configuration ‣ Setting.
Click on the accounting option to count landed costs in product cost computation as well as perpetual inventory valuation. Once you have modified the configurations as shown in the screenshot below, you may click Apply to save your changes.
Then, on the Purchase application, click Configuration ‣ Setting. Then, choose the costing method using a “fixed, “real, or “average” costing method then click Apply to save your changes.
Setting Up Types of Landed Cost
Shipping insurance, like other types of landed costs we discussed, can easily be set up on Odoo Inventory. Begin by creating specific products to note your various landed costs, including freight, customs, or shipping insurance. Simpy head on to Inventory ‣ Configuration ‣ Landed Cost types and set up as necessary.
How to link landed costs to a transfer on Odoo
In order to calculate the amount of landed costs, just head over to Odoo Inventory ‣ Inventory Control ‣ Landed Costs.
Then, click on “Create” and select the picking(s) you wish to attribute landed costs to.
Then, select the account journal wherein you wish to post landed costs. Protip here: we recommend creating a specific journal for landed costs in order to monitor your postings in an orderly manner.
Click on “Compute” to see how landed costs will be distributed across the picking(s).
Once you have checked and confirmed the attribution of landed costs, click on “Validate” to finalize it.
Syncoria is a full-service digital agency based in Toronto, Canada. Since 2004, Syncoria has helped small and medium enterprises across North America to harness the power of technology to transform processes, customer experience, culture, and customer service to meet the needs of a rapidly changing market.
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