Insurance is provided automatically for items shipped via UPS. Click here for the UPS Claims FAQ.
If you purchase insurance for an item shipped via USPS that is subsequently lost or damaged, refer to Publication 22, Customer Guide to Filing Domestic Insurance Claims or Registered Mail Inquiries.
If you don’t purchase insurance for a subsequently lost or damaged item shipped via USPS, you’re on your own. I always buy Delivery Confirmation when sending domestic packages via USPS, if for no other reason than it verifies the item was delivered–not necessarily, but probably, to the correct address. Upon seeing the bright green Delivery Confirmation sticker affixed to the front of his or her package, a potentially unscrupulous buyer might think twice about falsely claiming not to have received the item.
As for damage claims, that’s a little trickier. I encourage my buyers to purchase insurance, but it’s optional–and most buyers of low-ticket items don’t want to spend the extra cash. If one of my buyers rejects insurance and then receives an obviously manhandled box with damaged goods inside, I say I’m sorry and remind them of the purpose of insurance. eBay recommends that sellers insure all international shipments.
Some sellers state in their auctions that insurance is mandatory. Others factor it into their shipping/handling fees, thereby also making it mandatory. Still others self insure, meaning they charge the buyer for insurance but don’t purchase it when they ship the item. Instead, these sellers assume responsibility for any damage that might befall their packages in transit.
If you pack your items conscientiously, and don’t scrimp on packaging materials, you shouldn’t have to worry too much about the stuff you ship getting damaged; but you should take responsibility for any item that arrives damaged inside an intact box.