Every shipper knows that sometimes a package gets lost, broken, or even stolen in transit. Naturally, supply chain managers want to claim refunds for those packages, so when they see a recommendation from their carrier to “add extra coverage,” it feels like an easy decision. Often, what these prompts are encouraging shippers to do is to sign up for Declared Value Coverage, and although it may sound like it, declared value coverage is not actual insurance coverage. In this article, we’ll learn more about what it is and how two of the industry’s biggest carriers have set up their declared value coverage policies.
What is Declared Value Coverage?
Essentially, declared value coverage allows shippers to declare the value of shipments before they’re handed off to the carrier. It simply sets the carrier’s maximum liability claim for any total loss or damage that may occur to the parcel in transit. When shippers do this, it increases the carrier’s financial and legal liability above their existing limitation. It doesn’t increase the carrier’s liability, but it does allow shippers to recover more of their loss or damage costs in the event that occurs.
Many shippers and customers alike have complained that declared value coverage is confusing, partly because carriers like FedEx and UPS have charged shippers more when a declared value coverage is selected with the assumption that shippers won’t notice the increase in cost. Oftentimes, the maximum liability set by carriers is much higher than shippers actually need to cover the value of their goods. When you ship goods through a third-party parcel carrier, it’s good practice to ensure you’re not paying for more coverage than you need. It’s also common for third-party insurance companies to charge a premium price for the insurance policy they offer.
FedEx Declared Value Coverage
With this parcel carrier, shippers that don’t have FedEx declared value coverage, the maximum liability the they will accept is $100. The cost you can expect to pay for coverage varies based upon the service, the value declared, and the weight of the package itself. In 2022, the declared coverage rates were detailed in the 2022 FedEx Service Guide.
For an added layer of security, FedEx also requires a direct signature for delivery on a parcel that is worth over $500. On items of “extraordinary value,” declared value is limited, and it depends upon what the package contains and where it’s going. If you ship expensive jewelry valued up to $100,000 per domestic package or $25,000 on international packages, you have the option to sign-up for FedEx’s Declared Value Advantage high-value jewelry shipping program.
UPS Declared Value Coverage
While its maximum liability for lost or damaged packages sits at $100 automatically, adding declared value coverage is always an available add-on. Like FedEx, the UPS declared value coverage depends upon a variety of factors, including the type of package, the service you’ve chosen, your location, and the location you’re shipping to. If you’re looking for an estimate on the cost of shipping with this added service, UPS offers a parcel delivery quote calculator on their website for individual package costs.
However, UPS claims restrictions on certain items. For lost checks, phone cards, tickets, gift cards, and other similar products, UPS will not reimburse the value of those items and instead will cover the cost of stopping the check or replacing the physical card. If media like documents, film or photographs, are lost, UPS will cover only the costs of the paper or the memory cards. As for antiques and specialty items, shippers must provide proof of value, such as an appraisal, in order to be reimbursed.
UPS claims also say that they will deny reimbursement in instances of “insufficient packaging” unless the item in question was packaged and shipped at a UPS Store. In that case, shippers will be “reimbursed the item’s value (subject to the lesser of the actual value, replacement or repair cost), the cost of packaging materials and service as well as the shipping costs (excluding declared value charges).”
What This Means for Shipping Companies
In order to know how much declared value coverage you need for a package – or whether you need it at all – it’s essential that you accurately calculate the value of your shipments. While you likely want some coverage, paying for more coverage than you need is a waste of resources that can quickly add up over time. To find out how much you’re spending on declared value coverage, you can turn to your most valuable resource: your invoices. These documents are packed with information about what your carrier is charging you for down to the penny.
Auditing your invoices regularly is critical, but it can require hours every month, something that many companies just can’t afford to spare. That’s why Reveel exists. With our platform, we will audit your invoices so you can focus on improving your own supply chain. This customized, 45-point audit highlights refund opportunities you may not realize you are owed. With this audit, we’ll also find the areas where you’re overspending, allowing our experts to review your declared value coverage and calculate whether it’s a place you can cut costs. Contact us today to schedule your demo and start saving today.
