What is Self-Insurance?

GoToSupplies

Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

Since most packages arrive at their destination safely, many sellers choose to self-insure instead of purchasing insurance from the service they are shipping through or through third-party insurers (great for insuring International First Class when you need it since USPS doesn’t offer insurance on First Class International Mail). Some call it a rainy day fund, some just consider it part of their overhead.

How do you self insure?

Basically you build a little into your item price or shipping to cover your losses–say 25 or 50 cents–or whatever works out right for you/your item prices, then put that extra money aside to cover the few packages that go missing.

For example, if you have 1 in 100 packages go missing, raise your item prices or shipping by the cost of a missing item divided by 99 delivered packages and you should be good. For a $24 item:

$24.00 / 99 = about $0.25

That’s a real simple example, it won’t be as easy if your prices vary a lot, but should give you an idea of how it works. Even if you added $1 to every $24 item to cover the losses, your buyer would still be paying less than if you insured through the postal service. Another great benefit–you don’t have to file an insurance claim with anyone to wait to be re-imbursed. You have the money, you take care of your buyer, the end.

When do you self insure & when do you pay for insurance?

Every business has a different price point at which they need help covering the loss of an item. If you mostly sell $25 items but have a few that are far more expensive, you might choose to purchase insurance on the pricey items.

If you have a few that are especially delicate or irreplaceable, those might be ones to pay for insurance on, while if you whole business is delicate or irreplaceable items, you might just charge a bit more for your self-insurance.

Is self-insurance legal?

I have read a few times that self-insurance is illegal in some places, though I haven’t been able to find information about that when it comes to shipping–just car insurance, employee health insurance, that sort of thing.

To be on the safe side, we don’t mention insurance unless it is a package that we’ll purchase insurance for, from an extrernal insurer (like USPS, third party insurers, etc.)

More on purchasing insurance here, including information on third-party insurance:

Shipping Insurance

And more shipping help in general here–same as the gold link in the right sidebar of every blog page:

Shipping Basics

Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

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