Setting the record straight on self-funded shipping protection vs. traditional insurance models
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 shipping protection industry wants you to believe you have two choices:
This is a false choice. There’s a third option that’s both more profitable and more customer-friendly: merchant-managed shipping protection.
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:
This isn’t revolutionary. Businesses have always had the right to exceed customer expectations and charge appropriately for premium service.
Despite years of warnings about “regulatory crackdowns,” here are the facts:
No enforcement actions against merchants for self-funded shipping protection
No specific laws prohibiting merchants from managing their own delivery guarantees
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.
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.
With insurance-backed solutions, you’re bound by their claims processes, coverage limitations, and approval timelines. Your customers become their customers when problems arise.
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.
Forward-thinking merchants are choosing a different path:
Keep 100% of protection fees to fund exceptional customer service
Set your own policies, response times, and resolution methods
Handle issues directly without third-party bureaucracy
Use protection fees exactly as intended—to solve customer problems quickly
The key is positioning and language. You’re not selling insurance—you’re offering enhanced customer service:
“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]”
“Insurance coverage protects your shipment”
“Policy covers theft, loss, and damage”
“Coverage underwritten by…”
The businesses warning you about regulatory risk often have the most to gain from your fear. Meanwhile, innovative merchants are:
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.
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.