Red Flags of Fake Shipping Insurance: 10 Signs to Check Before You Pay
Written by Jazmin A., Compliance Auditor
A two-minute checklist for the shipping protection box at checkout, built on what state regulators and the NAIC tell consumers to watch for.
Back to the resource centerKey takeaways
- Regulators in Utah, Oklahoma and Connecticut, and the NAIC, have all warned about unlicensed package protection.
- The most useful check is simple: who is offering this, and are they licensed?
- A red flag is a reason to look closer, not proof of wrongdoing. Whether a product is insurance is decided by state law and regulators.
- Wording like "not insurance" or "sole discretion" tells you a lot about what happens if you file a claim.
What do regulators say about fake shipping insurance?
“Beware of unlicensed, unauthorized, and potentially fake companies and individuals”…— NAIC, Consumer Alert: Beware of Package Protection Insurance Scams, July 18, 2024, content.naic.org
“Fraudulent shipping protection is worse than no protection at all”— Utah Insurance Department, March 20, 2024, insurance.utah.gov
“Legitimate shipping insurance providers will be licensed companies or producers.”— Oklahoma Insurance Commissioner Glen Mulready, November 28, 2023, oid.ok.gov
Unlicensed companies have “no regulatory oversight to ensure they pay for lost or stolen items.”— Connecticut Insurance Department, December 9, 2024, portal.ct.gov
What are the 10 red flags of fake shipping insurance?
- The checkout says "insurance," but the terms say "not insurance." If the button and the fine print disagree, the fine print is what governs your claim. Read both.
- No insurer is named. Real insurance has an insurance company behind it. If the terms never name one, you can't check it.
- No license number or licensed seller. Utah says "Legitimate shipping coverage providers will be licensed as insurance companies or insurance agents." Look for a named agency and a license number you can verify. See how to check a license.
- Claims are paid at someone's "sole discretion." That wording means the company decides whether to pay. You may have little to point to if it says no.
- The box was already checked. The FTC's staff report on dark patterns lists "pre-checked boxes" and "sneaking unwanted products into consumers' online shopping carts without their knowledge." Several pending lawsuits allege pre-selected protection fees are deceptive. Those are allegations; see our lawsuit tracker.
- The fee goes to the store, and the store decides claims. Some programs let the merchant keep the fee and approve or deny claims. That is a guarantee from the store, not a policy from an insurer.
- It's called a warranty, guarantee or plan, but covers theft or loss. The NAIC warns that unlicensed sellers "may claim these products are warranties, guarantees, or protection plans." Paying for theft or loss can be insurance no matter the name.
- You're told you're "not an insured," with no explanation of who pays you. Some insurance-backed programs say this too, but they also name the policy and say how reimbursement reaches you. Missing details are the warning sign.
- The fine print is full of exclusions and short deadlines. Utah warns: "Some companies will use technicalities and fine print to avoid paying consumers."
- You can't tell who is offering it. The NAIC and Connecticut both tell shoppers to "carefully review the shipping protection options and who is offering them." If you can't find a company name, you can't check it or complain about it.
What wording should I look for in the terms?
These are common kinds of wording in shipping protection terms. Many legitimate programs use some of them, and disclosing them clearly is a good sign. They are shown so you can recognize what each phrase means for your claim. For examples in specific providers' own words, see Shipping Protection vs. Shipping Insurance.
| Wording to look for | Typical wording (illustrative, not a quote) | What it tells you |
|---|---|---|
| An insurance disclaimer | "This product is not insurance." | You are not buying an insurance policy. Your rights come from the terms. |
| Discretion over payouts | "Claims are approved in the company's sole discretion." | The company decides whether to pay. |
| Merchant decides claims | Wording, often in merchant materials, that the store approves or denies claims. | The store you bought from reviews your claim. |
| Fees kept by the merchant | Wording, often in merchant materials, that the store keeps the protection fees. | Your fee goes to the store, not to an insurer. |
| Not an insured | "You are not an insured under any policy." | You have no direct rights under any insurance policy. |
| Not an insured, but a loss payee | A named policy and insurer, plus "any reimbursement will be directed to you as a loss payee." | A named policy backs the program, and payouts are directed to you. |
For a full breakdown of these models, read Shipping Protection vs. Shipping Insurance.
Is a red flag proof that shipping protection is fake?
No. A red flag is a prompt to check, not a verdict. Whether a product is insurance, and whether its seller needs a license, is decided by state law and regulators based on what the product does, not what it is called. Some programs disclose clearly that they are merchant guarantees. Others are backed by licensed producers and named insurers. What matters is that you know which one you are paying for.
Reassuring signs
A named insurer. A named, licensed agency with a license number you can find in a state lookup. Clear claim steps and an appeal route. A checkbox that starts unchecked.
What to do if you see red flags
Uncheck the box. Ask the store who provides the coverage. Check the license. If you were already charged, see our refund guide or report it to your state.
For porch theft, the NAIC adds another option: "consider filing a claim with your homeowners or renters insurance policy."
Frequently Asked Questions
How can I tell if shipping insurance is fake?
Check whether the terms name an insurer and a licensed seller, and verify the license with your state insurance department. If the terms say the product is not insurance, you are relying on the company's promise, not an insurance policy.
Is shipping protection that says "not insurance" a scam?
Not necessarily. Some companies openly describe their product as a merchant guarantee. Regulators decide whether a product is legally insurance. Read the terms so you know who pays claims and how.
Should I uncheck the shipping protection box?
That's your choice. If you want coverage, check who offers it first. If you don't, uncheck the box and confirm the fee is gone from the order total before you pay.
Who can help if fake shipping insurance doesn't pay?
Your state insurance department is the first stop, though regulators say they may not be able to help if the seller is not licensed. Your card issuer and state attorney general are other options.
Do regulators name specific fake shipping insurance companies?
The consumer alerts from the NAIC, Utah, Oklahoma and Connecticut warn about the practice in general and tell consumers to check licenses. They don't give a list of companies to avoid.
Pass the checklist with InsureShip
InsureShip is licensed by the California Department of Insurance, license #0G55434, and licensed nationwide. Established in 2009. Underwritten by Navigators, a Hartford company, rated A+ by AM Best (Navigators Insurance Company, as of 2024). Claims are filed online and handled by InsureShip. Merchants can offer it on Shopify, WooCommerce and other platforms.
Talk to InsureShipSources
Last checked October 8, 2026. General information, not legal advice. Regulators: NAIC consumer alert · Utah Insurance Department alert · Oklahoma Insurance Department alert · Connecticut Insurance Department alert · FTC: Bringing Dark Patterns to Light · The Hartford: Navigators fact sheet (Apr 2025).