Protecting Your Expensive Shipments:
Are you being led astray by Declared Value Fees being disguised as insurance?
As you prepare to put your valuable shipments into a carrier’s hands, there are certain precautions you should take. In instances where your item is lost, stolen, mishandled, or damaged, you want to be sure you are covered. However, the terminology and/or options available to you may not be so easy to understand.
How do I get the coverage I need?
UPS and FedEx protect your package (domestic or international) for the first $100 of its value – sort of.
The terms insurance and declared value are often interchanged. This is a common misconception – that declared value is the same as insurance – it isn’t. Declared value is the acknowledgement of the maximum liability the carrier would be responsible for in the case your package is lost or misplaced. However, if packages are lost, stolen, damaged, destroyed, and/or misplaced, you’re not fully guaranteed to be compensated properly.
If you opted to pay the fee for a higher declared value, you have the right and ability to file a claim under these circumstances but said claims can be disputed by your carrier and their extensive lists of disqualifications can leave you without the reimbursement for your lost or mishandled valuables. Subsequently, just because you set a declared value above and beyond the first $100 does not mean that you will be repaid for your item, it simply means that UPS collected a fee acknowledging the value of the parcel. This fee simply allows the investigation of the reimbursement process to begin. So, if you have a highly valuable package that needs to ship safely from one location to another, you may be desiring formal insurance, such as, cargo insurance, all risk insurance, or other insurances provided via third parties. Many business owners don’t realize that their (already in place) insurance policy may be all the coverage you need.
The below excerpt, taken directly from the 2018 UPS Rate and Service Guide may help to explain the confusing language and its intent.
Domestic, Export and Import Value-Added Services:
|Declared Value Option||Fee|
|$0.00 – $100.00||$0.00|
|Over $100.00; for each $100.00 (or portion of $100.00) of the total value declared||$0.90|
|Minimum||$2.70 *(equaling $400 total in declared value)|
A package contains jewelry that the shipper values at $500.00 and decides to declare its value as such. The additional fee charged to ship the package is $3.60 (4 x $0.90). This represents that UPS acknowledges the contents of your shipment at a $500.00 value.IT DOES NOT AUTOMATICALLY REPRESENT A REPLACEMENT VALUE OF $500.00.
FedEx Ground fees are not much of a steal either – The first $100.00 value is also free, followed by $3.00 for shipments valued between $100.01-$300.00 and then $1.00 for every $100.00 after that. Keep the price of these fees in mind when shipping packages and remember the fee is based on each item in the shipment (not the parcel as a whole). Another aspect to consider are the minimums. Since the minimum for UPS is $2.70, which equates to a value of $400.00, if your item is worth only $101.00, this might not be cost effective for you.
So why would you make a declaration of value for your item?
While declaring value to your carrier is a good idea, the protection it provides is minimal. As mentioned previously, even though you could pay a fee and declare a value of more than $100 for the contents of your shipment, it does not include a money back guarantee. Declared value simply adds acknowledgement of possible liability above what the carrier normally is willing to provide. So, by not making a declaration of value, the carrier has limited liability for your item in the event of damage, loss, and/or delay. By declaring a value, it will reflect the cost of what is contained in the shipment. This allows the shipper to pursue and expect a higher recovery effort than what is outlined in the carrier service guide. Key factors for liability and whether or not an item needs to be repacked to obtain liability are:
- Weight and Density
- Size (size limits determined by carrier and shipment method)
Value is a broad term – is the item sentimentally valuable to you? Or is it monetarily valuable? In instances where an item is worth more financially, using an air-service method may be preferred over ground transportation since air services may be safer, quicker, and offer more security. HERE’S the KICKER: Regardless of the value to you, proof of that value will almost surely be required and must be provided. This can be in the form of an invoice, receipt, or value of a “like” item. In instances of valuables that are sentimentally valuable, but their value cannot be measured, UPS will not reimburse you.
Even if you take the proper steps in proving the value of the items you’re shipping, you still might not see that value reimbursed to you if your shipment doesn’t reach its destination or arrives ruined. To win a claim against a carrier, the shipper must prove that the shipment was damaged in the carrier’s custody. This is particularly important in instances where a loss is attributable to an “act of God.” This includes severe weather, natural disasters, damage from insects and/or other animals, wars, disruptions in national transportation, etc., all of which would void a carrier’s liability for damaged or lost shipments.
A common and most avoidable condition on the shippers’ part is improper or inadequate packaging. If the packaging fails to meet the standards outlined by the carrier’s published standards, the claim will be denied, regardless of declaration of value. Paying attention to these guidelines and educating yourself in these terms and conditions can help you in the claims process should these events ever occur.
The Good News
If you choose to ship via UPS or FedEx, the contents of your shipment are acknowledged for possible coverage for up to $100 in the event they are lost, stolen, or damaged. The USPS offers a similar coverage for certain services like Express Mail. If your company sends shipments whose contents do not exceed $100, then the declared value coverage, at no additional cost, is beneficial for you. In unfortunate circumstances where the shipment does not make it to it’s intended location in the proper condition, or does not arrive at all, you could file a claim and possibly get reimbursed – but reimbursement is highly unlikely. If the contents of your shipment exceed $100, this is when traditional insurance provided via third parties may have been more beneficial to offer repayment for goods.
Or, you can put your trust in the declared value fees, understanding the terminology used by the carriers. Of the many services we provide, LJM Group helps implement strategies that optimize lowering your shipping spend– we want you to ship smarter and we will help recover any costs should anything (unfortunate) happen along the way.