USPS SHIPPING INSURANCE: COLLECTING WHEN NECESSARY

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As buyers and sellers, we all know that breakage and loss does happen.  As buyers, we need to have some confidence that our purchases will survive the shipping process and that we will not have wasted our time and money.  As sellers, we like to have some confidence that we will actually profit from our eBay transactions rather than suffer financially.

SELLER  CONCERNS

As a seller, we can give our buyers the option to purchase shipping insurance or require that they do so.    The benefit of each of these approaches is best determined on an auction by auction basis.  Let's first look at the process of purchasing and collecting on USPS insurance in order to determine the benefits. 

Purchasing Insurance

Insurance can be purchased from the USPS (either at the kiosk or at the counter) based on the overall value of the package.  (Example:  An insurance purchase of $1.35 is required to insure an item with a value of up to $50.)  A dialog box showing item value and required insurance is available when using the auction style setup feature within eBay.  At setup, you can either manually instruct eBay to charge a specific amount for insurance or you can select that the cost of insurance be calculated based on the final selling price of the auction.  (Please see eBay policies for requirements on charging for shipping insurance.) 

If, as the seller, you give your buyer the option to purchase insurance and they choose to do so, you have an obligation to purchase the insurance from the USPS.  However, remember, that the buyer has also bought into the obligation to assist in the collection of the insurance payout should damage or loss occur.  Some sellers and buyers do not understand this, nor do they understand the amount of effort that is required to file a request for compensation due to damage or loss.

Requesting Compensation from USPS

If an item that you have shipped has been damaged, then you will most likely be notified immediately by the buyer.  This notification may be somewhat emotional, because buyers may be annoyed, angry, disappointed and even frightened that they have been taken advantage of when they receive a damaged good.  It's best not to take emotional responses personally.  (It's always the seller's responsibility to remain professional.)  It is in the seller's best interest to respond immediately to the buyer's notification even if you are not sure how you will handle this situation.  Remember, though, that is is even better to have a plan of action before you mail the package.  Often, the first place to start after you receive a damage notification is to request proof of damage in the form of a photograph and request that the buyer retain all packaging as well as the damaged item.  See an example photograph below of a damaged chalkware cat figurine:

Paperwork

In order to receive compensation from the USPS, the claimant must complete the form PS Form 1000, which can be downloaded from the US Post Office's website.  Information (such as name and address) must be completed for both the mailer and the addressee.  The form includes an option for the compensation payment to be made either to mailer or the addressee.

Footwork

Once the form is completed, the form along with the proof of insurance, damaged goods and all of the packaging materials must be presented in person at one of the thousands of US Post Office's nationwide.  (A photograph showing damage (as shown above) will not suffice as far as the USPS is concerned.)  As you can imagine, logistics make it more feasible for the buyer to present the form and materials at their local post office than for the seller to try to accomplish this.

Once the reimbursement is approved, a check can either be sent directly to the addressee or the mailer by the USPS.

As you can see above, compliance by the buyer is a must in order to make purchasing USPS insurance worthwhile for the seller.

Is It Worth The Hassle?

A large amount of work is required by both buyer and seller in order to receive compensation from the USPS for damage and loss.  Is the hassle worth it?  Well, that question can most likely be answered only by the buyer and seller themselves.  

Keep in mind that insurance provides two things:

  • Buyer confidence
  • Seller confidence

Ensuring Buyer's Confidence

As the seller, if you have had good success with sending items USPS with no damage, and are therefore confident in the system, then you may want to forego offering or purchasing USPS insurance.  Instead you can offer your buyer a refund or a replacement if damage occurs whether-or-not insurance was purchased.  This way, you can give your buyer confidence without going through the hassle of purchasing the insurance and everything else that goes along with that.  This option is very attractive to buyers, however, as the seller, you will see a net loss for the transaction.  Keep in mind that even though you may lose money on this one transaction, you will keep your customer happy and therefore retain a highly positive rating on eBay.  (Please see eBay policies for requirements on charging for shipping insurance.) 

Ensuring Seller's Confidence

The above sounds easy enough, but what if you are shipping a relatively expensive item and you can't afford to absorb the cost of a refund should the unspeakable occur?  Well, faithful eBayer, that's why insurance is available.  Most people are willing to pay the small nominal fees, complete the paperwork and the footwork if it means that they can be reimbursed for large amounts of money (whatever "large" may be to their way of thinking).  Remember, however, that insurance money can not be collected until the damaged item and packaging is presented at the post office.  Therefore, as the seller, you are at the mercy of the buyer to retain these items and to perform the footwork.  With that said, the entire reimbursement process is most effective if the seller requires that the buyer obtain compensation directly from the post office rather than through the seller.  The seller can mail the proof of insurance and completed forms to the buyer and then the buyer can perform the footwork.  If the seller reimburses the buyer for the item prior to being compensated by the Post Office, then the buyer has no incentive to assist in collection of money from the Post Office.      

BUYER'S CONCERNS                 

As buyers, we like to have some confidence that our purchases will make it through the delivery process unharmed.  Whether or not the goods arrive at our doorstep in good shape is somewhat out of our hands.  Careful packing, of course, is the responsibility of the seller and careful shipping is the responsibility of the USPS.  There are some things that we buyers can do, however, to ensure that our goods are not damaged or that our pocketbooks aren't harmed if damage of our purchase does occur.   

Request A Packaging Method

If you are considering bidding on a fragile item, it may be worth your time to inquire into your seller's method of packing.  Will they be double boxing?  Will they use one box the same size as the item?  If you need your item double boxed or if you are sure that your item requires a certain packing method, its best that you inquire before you place your bid.

Request A Shipping Method

Some types of USPS shipping are inherently more safe than others.  Its best to request (and pay for) a safe shipping method for your item.  Below are the USPS shipping options:  

  • Media Mail is probably the least safe of all types of USPS.  (Hey, who needs to worry about breaking a book?) 
  • Parcel Post is a little safer than media mail.  I was advised by a USPS worker to never allow shipment of Fragile Items by Parcel Post.                    
  • Priority Mail is the most cost effective means of shipping for fragile items.  Request that your package be marked "Fragile" when shipping Priority so that the handlers will know to treat the package carefully.
  • Express Mail is often the safest, because less time in travel means that fewer hands touch the item.  Express Mail is much more expensive than Priority, though and not as cost effective as the Priority Mail option.

Request Insurance

If you are still concerned about the "health" of your purchase while in transit, by all means, request and pay for insurance.  Be prepared, however, to perform the footwork to receive compensation is damage occurs.

Collecting Compensation

Below are the steps that should be taken by any buyer when confronted with damaged goods:

  1. Retain the item along with all packaging.
  2. Photograph the item if possible to record the damage.
  3. Notify the seller that the item you purchased was damaged and send them the photograph which records the damage.
  4. Request the appropriate forms and proof of insurance from the seller.  In order to receive compensation from the USPS, the form PS Form 1000, which can be downloaded from the US Post Office's website, should be completed.  Information (such as name and address) must be completed for both the mailer and the addressee.  The form includes an option for the compensation payment to be made either to mailer or the addressee.  Request that the seller complete the form to the best of their ability ASAP and mail the forms to you along with the proof of insurance (receipt).
  5. Once you receive the form and proof of insurance, finish completing the form. 
  6. Present the damaged goods, all of the packaging materials, form and proof of insurance in person at your local US Post Office.  

Amount of Compensation

It's my understanding that the USPS will only compensate loss for the actual purchase price of the item that was damaged.  They will not compensate for any handling fees that the seller has passed onto the buyer.  This is, yet, another reason why buyers should be leary of purchasing an item at a ridiculously low price and, instead, pay a ridiculously high shipping and handling fee.  You may get back your penny, which was documented as the actual price of the item, while you are out $10 or more in handling fees. 

More to come!

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