The Ins and Outs of Declared Value
Shipping is big business. In fact, just UPS, FedEx and USPS (United States Postal Service) combined shipped over 16 billion packages in 2017. When shipping a package, the term, declared value, is commonly used. Often, senders mistakenly think declared value and shipping insurance are the same thing. However, this is quite a misconception. It is key to understand the definition of declared value and how to overcome coverage gaps to ensure your shipping needs are adequately met.
The Definition of Declared Value
Declared value is optional coverage businesses can place on a specific shipment in the event of loss, damage or theft due to carrier negligence. The level of protection is based on that stated value. However, as mentioned above, declared value is not insurance; therefore, there is no guarantee you will receive funds if something does happen to your goods. To be clear, declared value does not cover Acts of God, War or Terrorism.
Coverage Hurdles
If your package is not delivered in good shape or is not delivered at all, an investigation will occur based on the declared value. However, there are many hurdles that must be overcome before any funds are sent to you. The largest hurdle entails packaging. It is critical to ship any items in the prescribed and tested packaging offered by the shipper. Even if you pack an item in a shipper’s package, it is best to take it to a shipper’s facility and have it tested prior to shipping. This will help ensure maximum reimbursement in the event of an investigation.
Claim approval for damaged packages is very low. If a package is stolen, there are many hurdles that you must go through to prove the theft happened. However, claim approval is a little higher than for damaged packages. When a package is classified as lost, claim approval is even better. If you do receive funds for the package and it is found within three to six months, the package will be shipped to you and the carrier will request the money be returned to them. However, this does not apply to perishable items.
Alternatives to Declared Value
If you have a business that ships packages frequently, it is critical to consider alternatives to declared value. Below are four shipment insurance options:
- Packaging Insurance
The first option is transit insurance offered through a packaging insurance company. Typically, a business client pays an annual premium that is based on their history loss for the previous three to five years. If there are any losses, the types of claims will be taken into account. Next, the insurance provider will consider the packaging that is used and the type of merchandise that is being covered. There are various freight alternatives, ranging from air and ocean to LTL (less than truckload), small package and cargo.
- General Liability Insurance
A general liability insurance policy can incorporate transit insurance too. This type of insurance is typically for ocean or air freight. It usually covers a large value, but also comes with a big deductible, which can be as high as ten thousand dollars.
- Transit Insurance
Transit insurance is provided by a third-party company outside of the types of policies mentioned above. The previous two options may be more cost effective because transit insurance is just one component of the policy.
According to transportation consultant, Jeremy Carley, “Transit insurance companies such as UPS Capital, bring their own set of merits. For example, when working with other types of insurers, they first must rely on the approval process of the carrier before they can approve a claim for their client. Transit insurance companies can bypass this step.”
- Self-Insure
The last option is to self-insure, which many companies are now implementing. “Companies conduct an analysis and put aside into a reserve an amount that is equal to merchandise that gets lost, damaged or stolen in the course of a year. These companies then pay themselves when merchandise falls into one of these three categories,” explained Jeremy.
We can Help You Navigate the Shipping Maze
Declared value is just a small component of today’s complicated shipping industry. It is key to consider the alternatives to declared value and implement the solution that best suits your business. As a 3rd party logistics company, AllGreen, can help you navigate the complexities of insuring your goods.
If you’re ready to discuss the best approach for insuring your goods, contact us at info@ag-sc.com or 847-531-2209.