The Truth About Shipping Protection: Why Insurance Isn't Always the Answer

Setting the record straight on self-funded shipping protection vs. traditional insurance models

Common Misconceptions

You’ve probably heard the warnings: “Offering shipping protection without insurance is risky.” “You need proper licensing.” “Merchants could face legal exposure.”

These scare tactics often come from companies with a vested interest in selling you expensive insurance-backed solutions. But here’s what they don’t tell you: thousands of successful merchants are already managing their own shipping protection programs—and doing it legally.

The False Dilemma

The shipping protection industry wants you to believe you have two choices:

  1. Pay expensive fees to insurance-backed providers (and give up 50% of your revenue)
  2. Leave your customers unprotected


This is a false choice. There’s a third option that’s both more profitable and more customer-friendly: merchant-managed shipping protection.

What Self-Funded Protection Actually Is

When you offer shipping protection through your store, you’re not selling insurance. You’re extending your customer service commitment. Think of it like this:

  • Traditional approach: “We’ll ship your order, but after that, you’re on your own”
  • Enhanced service: “For a small fee, we guarantee your order reaches you safely—and we’ll handle any issues personally”


This isn’t revolutionary. Businesses have always had the right to exceed customer expectations and charge appropriately for premium service.

The Legal Reality (Not the Fear-Mongering)

Despite years of warnings about “regulatory crackdowns,” here are the facts:

Zero Enforcement Actions

No enforcement actions against merchants for self-funded shipping protection

No Specific Laws

No specific laws prohibiting merchants from managing their own delivery guarantees

Thousands of Success Stories

Thousands of successful merchants using these programs without issues

Yes, insurance regulators have issued general guidance favoring licensed providers. But guidance isn’t law, and speculation about “potential exposure” isn’t the same as actual risk.

Why Insurance-Backed Solutions Don't Make Sense

The Revenue Split Problem

Insurance-backed providers typically keep 40-50% of protection fees. For a merchant collecting $10,000 monthly in protection revenue, that’s $4,000-5,000 going to the insurance company instead of funding better customer service.

The Control Problem

With insurance-backed solutions, you’re bound by their claims processes, coverage limitations, and approval timelines. Your customers become their customers when problems arise.

The Relationship Problem

When shipping issues occur, customers contact you—not the insurance company. You still handle the relationship management while paying someone else to hold the money.

The Smart Alternative: Merchant-Managed Protection

Forward-thinking merchants are choosing a different path:

Full Revenue Retention

Keep 100% of protection fees to fund exceptional customer service

Complete Control

Set your own policies, response times, and resolution methods

Better Customer Experience

Handle issues directly without third-party bureaucracy

Transparent Operations

Use protection fees exactly as intended—to solve customer problems quickly

How to Do It Right

The key is positioning and language. You’re not selling insurance—you’re offering enhanced customer service:

Good

“Optional delivery guarantee—we’ll replace or refund if issues occur”

“Premium shipping experience with direct merchant support”

“Service provided directly by [Your Store Name]”

Avoid

“Insurance coverage protects your shipment”

“Policy covers theft, loss, and damage”

“Coverage underwritten by…”

The Bottom Line

The businesses warning you about regulatory risk often have the most to gain from your fear. Meanwhile, innovative merchants are:

Keeping more revenue
Providing better customer experiences
Building stronger customer relationships
Operating successful programs without legal issues

The choice isn’t between “risky” and “safe.” It’s between giving up control and revenue to insurance companies, or taking charge of your customer experience while keeping the profits you earn.

Your customers want peace of mind. Your business needs profitable growth. Self-funded shipping protection delivers both.

Ready to explore merchant-managed shipping protection? Learn how Shipment Guard helps thousands of businesses provide better customer experiences while keeping 100% of protection revenue.

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