Etsy’s Purchase Protection Program for Sellers: What You Should Know

Updated May 2023

Etsy started a Purchase Protection Program in 2022 that takes care of some issues with shipping orders.

While this looked like it could be an improvement, because it does give sellers some protection as far as losing money if a customer files a case about a package that was never delivered, it’s not as simple as it looks. What does this program cover?

The Etsy Purchase Protection Program covers, with some limitations, packages that are lost in transit, as long as the shop is within the parameters of the program’s guidelines. It will also cover the cost of replacing one package per year as the result of damage, and against customer claims of certain other problems with delivery.

So what are the guidelines and limitations, because those are what will trip people up. Let’s go over the actual guidelines and see what each one means for sellers who have packages that cause trouble, and what sellers need to watch out for.

etsy's purchase protection program for sellers: what you should know.

Table of Contents

Some of the links in this article are affiliate links that will pay me a small commission if they’re used to purchase something. To see the entire affiliate policy click here.

(To see the official guidelines for the Etsy Purchase Protection ProgramOpens in a new tab., click here.)

Etsy Purchase Protection Program basic terms of use.

Basic terms of the program from Etsy's terms of use section
Basic terms of the program

The basic terms of use of this program are spelled out and give Etsy the right to change or end the program at any time That’s pretty standard, but we also have to look at what else this says.

First, Etsy is the decider. Etsy gets to make the decision about whether they’ll reimburse you for a lost package, and that decision is final.

I suspect that there will be times when we do or don’t get a response that we like as sellers, so be aware that this program doesn’t guarantee that every lost package request is going to be approved.

We have no legal claim against Etsy under the program, which is pretty standard legalese that means we can’t sue them if we’re mad about a decision.

Now this is the big one, and my guess is that people will overlook this: If you file a claim and Etsy denies it, the customer can still file “make claims against your shop.” What that means is unclear because as you’ll see a little further along is that it looks like a buyer has to file a claim to get Etsy involved to begin with.

Just because Etsy says that the transaction doesn’t fit in the “refund this” box doesn’t mean that the customer is wrong. It just means that you’ll have to handle it.

So basically, you can file a claim, but if Etsy turns it down, it’s not saying that the customer is right or wrong, it’s just opting not to pay for that claim. Don’t assume that Etsy not refunding means that they don’t think a refund should happen, it just means that they’re not going to be the one to pay for it.

So let’s move on to the next section of the Terms of Use, which describes the program itself.

crushed package
This would be covered once a year.

What is the Purchase Protection Program for sellers?

The Purchase Protection Program for Etsy sellers is meant to refund the cost of packages that are lost in transit, claims of “not as described,” as well as a limited number of damaged packages per calendar year. The refunds will come from the fund that Etsy has assigned for that purpose so that sellers aren’t financially liable for the cost of the refund, and buyers still get their money back for lost items.

Of course, there are going to be limitations, so let’s go through each point to figure out how this will work.

How does the plan work?

The plan helps sellers AFTER a case has been filed by the customer. This is a little scary for sellers, because having a case filed against your shop has always been a negative.

Text from Etsy explaining how the protection plan works
How the plan works.

As the program has rolled out, though, it’s clear that this type of case actually doesn’t hurt your shop.

I clicked through to the page that goes over Etsy’s Case policy, and the way that they describe the Purchase Protection Program there is fairly punitive.

Buyers have to go to the seller first, then if the seller doesn’t refund they have to file a case to get Etsy involved.

Having said that, I do know many sellers who have had to use the program because packages were delivered to the wrong address even though the seller sent them to the address on the order, or they were marked delivered but the customer said they hadn’t arrived.

Since the seller did everything right, Etsy refunded the cost of the package and the seller wasn’t charged for it, so the program did protect them from a forced refund.

And as time has passed, it’s clear that Etsy isn’t handling the timeline exactly the way that the guidelines say.

There was an announcement in April of 2023 that they’re now using automation to “make the process smoother,” but what’s basically happened is that claims are being refunded within minutes of being filed.

Nobody is looking at the details, they’re just refunding them.

What’s included in the plan?

The Purchase Protection Program includes refunds for packages that are lost in transit, and one damaged package per calendar year. It will also cover the refund cost for customer disputes where the customer says the item wasn’t as described, but Etsy decides that the seller is right and did send the correct item. If Etsy says the customer is right for items not as described cases, the seller still has to pay.

Etsy also told me in a customer service chat that if a customer says the package wasn’t received but it’s marked as delivered, they’ll cover the cost of the refund to the customer as long as the other pieces of the shipping puzzle qualify.

They’ve also covered the refund for packages that sellers sent to the address that the customer put down when they told the seller later that it was the wrong address.

As long as the seller did their part, Etsy seems to be covering those types of situations, unless the order was over $250.

Etsy will only cover orders up to $250 in value, including shipping and taxes. If you have orders that are above that amount, you’d better buy insurance anyway, but that comes with its own set of complications, which I’ll talk about a little later.

This limitation is REALLY, REALLY important to think about.

Etsy has been refunding claims without really looking into them, including things that were marked as delivered by the post office.

Some sellers have had customers say that high-value orders that were marked as delivered didn’t arrive, and instead of working with the seller they filed a claim with Purchase Protection. Etsy IMMEDIATELY refunded the claim because they’ve started using bots and automation to handle these claims.

That means that even though the package was marked as delivered, Etsy refunded the full amount out of the seller’s funds because the cost was over the $250 limit.

Since it was marked delivered, postal insurance won’t pay you back for it, so a lot of sellers have lost a lot of money through this kind of situation.

Etsy will only cover you if you’re a qualified seller.

This means no strikes against your shop, and you need to be following all of Etsy’s policies.

What the program covers
What’s covered?

Etsy will only cover items that are described accurately if the customer says it’s not as described.

This is the point that I think we can all throw in the garbage, because if someone wants to be a scammer there are many ways they can mess around with this.

My suggestion would be to have them send the thing back before you offer a refund. If they’re just trying to keep the item and get a refund as well, that can put an end to the whole thing.

And if they do escalate it to the case level, Etsy will at least be able to see that you tried to work with them.

Etsy will only cover one damaged package per calendar year.

I don’t think that’s unreasonable, otherwise, people would just pack things in flimsy boxes and try to get refunds if things break.

damage policy
The damaged packages details.

Notice that this also mentions buying shipping insurance, which is the big wrench in the works that I’ll talk about in the next section.

What’s eligible for Purchase Protection on Etsy?

All sellers are eligible for Etsy Purchase Protection as long as they are a “qualified seller,” meaning that they’re abiding by Etsy’s policies, and if they follow the procedures required to track the packages for delivery confirmation.

There are other requirements, though, so read on for a breakdown of those.

Program tracking requirements.

how to use the plan instructions from etsy

To be eligible for the program, you have to use shipping labels that have tracking included, OR an Etsy shipping label.

I called Etsy support to check on whether we can use third-party labels, and the answer was that as long as the label has tracking, and the tracking number is entered on Etsy when the order is shipped, that will count as an eligible package.

So that’s good if you use a third-party shipping service like I do (I use to buy my labels,) but if you’re in a country where the tracking is very expensive, or you send things via letter mail with no tracking, you’re not going to be included in the protection.

You don’t HAVE to use Etsy labels to be eligible, though. At least for now…The program can always change in the future, we don’t know.

printing shipping labels
Printing shipping labels.

Program payment requirements.

You have to use Etsy payments to be eligible for coverage. If you’re in a country where Etsy payments aren’t available, you can’t be eligible.

I’m not sure why this is a requirement, other than Etsy having more control over whether the payment is valid or fraudulent, maybe?

But the short version of this is that if you don’t have Etsy payments and use that in your shop, you’re not protected under this program.

Use the shipping address that was provided at checkout.

This is a biggie. Because scammers often use stolen credit cards, then have the package shipped somewhere else, you HAVE to use the address that the customer provided when they checked out.

If you change the address, it voids the protection.

So how much of a change can you do? Can you reformat an address if the post office says that they want a different abbreviation or route number?

Your guess is as good as mine for this one. I would think that as long as you don’t change the address substantially, like changing the street or city, it should be fine.

I’m not going to worry about changing an abbreviation that someone provided to the full word, but that kind of thing doesn’t really change the address, it just clarifies it.

However, if a customer sends you a message after placing the order and says that they need you to send it to a different address, your best bet is always to cancel and have them repurchase it.

It’s always been a good idea to do that just to protect yourself from fraud, but now you can give them the excuse that in order to get the protection, you have to do it that way.

Will you lose some sales because people don’t want to buy twice? Maybe.

Is it worth it to take the time to do it? Maybe. Chances are, nothing will go wrong and the package will be delivered, but it’s up to you to decide whether you want to worry about this.

Personally, I’ll be asking people to repurchase just to have them verify the address. It’s better for a few reasons, purchase protection only being one of them.

Packaging requirements.

This should go without saying. And since Etsy will only cover one damaged package a year, I think that this is the one that’s going to get turned down the most.

Just make sure that everything is packaged well and that you can kick the package across the post office parking lot without worrying about it breaking.

If you can’t, wrap it better than you already have it wrapped.

Processing times.

processing times guidelines
Processing time requirements.

Here’s a big one for people who do custom orders and have customers who don’t answer messages. (I wrote another article about how to handle that, click here to read it: What to do if a customer isn’t responding.)

You have to have processing times on your listings AND an estimated delivery date that’s set up in your shipping settings in order to be eligible.

Plus, you have to ship things within those processing times. So if you need to extend that for some reason, do it before the original processing time period is over.

We also know that estimated delivery times are just that, estimates. So when you’re setting those up, be conservative about how long something will take to arrive.

It’s better to underpromise and overdeliver as far as shipping speed, and customers are going to be happier getting their packages sooner rather than later.

If a customer asks you to hold onto an order and not to ship it until a certain date, you need to extend the processing time too. Just agreeing to hold onto something isn’t enough, you still need to make sure that the shipping dates are accurate.

I personally don’t hold onto orders at all, so if someone asks me to wait to send something I’ll cancel the order and ask them to reorder it within a certain time frame. At least we can blame Etsy for that now.

Policies and “in good standing” requirements.

Shop policies and standing requirement
Policies and shop standing.

I lumped these two together because they’re pretty basic. You’ll need to have shop policies filled out, and your shop needs to be in good standing with Etsy in order for them to say that you’re eligible for the protection.

I wrote an article recently about return policies, so check that out here: How to set up an Etsy shop return policy.

It’s important to have your shop policies filled out anyway, but now you really need to make sure that you have them filled out.

A lot of people think that they do have them filled out, but they don’t, so go check now to make sure you’re covered!

Insurance exceptions to the Purchase Protection Program.

Now we come to the interesting stuff…The exceptions to the program that are based on insurance.

Insurance exceptions to the program
Insurance exceptions.

This is where it gets tricky. Etsy won’t count packages that are over $250 in value, INCLUDING shipping and taxes, as eligible for the Purchase Protection Program.

They also only pay for one damaged order per calendar year (if it’s eligible,) so they encourage sellers to buy additional insurance.

I called Etsy to clarify this, and it turns out that because regular priority mail in the US comes with automatic insurance, those packages are NOT immediately eligible for the protection.

So basically, if you buy insurance for a package, or if the type of postage that you buy has insurance of any amount added to it automatically, you have to go through that platform first before Etsy will look at it, or so they say.

If the other platform denies coverage, you can then try to get Etsy involved.

This also applies to any type of coverage that’s provided by the payment processor. If you use a third-party shipping service and they offer automatic insurance, Etsy says that you have to go through them.

However, what’s actually been happening is that Etsy refunds right away without asking about the insurance part of it.

Whether they start enforcing that or not is yet to be seen, but they don’t seem to be asking about it before refunding claims.

And since the program started, Etsy has been refunding claims almost immediately using bots that don’t seem to be actually looking at the details.

So sellers have been losing money for items that are over the limit, because those refunds come out of the seller’s account, not Etsy’s.

This program is an improvement for orders that are under $250, but not for higher-value orders.

Since Etsy has automated a lot of the claim process, there has been an increase in people getting automatic refunds regardless of the situation, and a lot of sellers have lost money because Etsy refunds higher-value orders out of the seller’s funds without doing any analysis of the claim.

If you sell anything that falls outside the Purchase Protection, and you wouldn’t be able to absorb the cost of forced refunds that may or may not be for a valid reason, you might want to move those items off of Etsy and sell them on your website only.

At least that way, you can have some control over issuing refunds.

Kara Buntin

Kara Buntin has run a profitable home-based business since 1999, and has a background in art, theater design, and cake decorating. She's a top Etsy seller with over 51,000 sales on Etsy and her own website, and helps other home-based business owners with their business goals and SEO. She founded the Artisan Shopping Directory website to promote the artisans who are members of her EShop Success marketing program.

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