PayPal Buyer Protection Covers eBay Auctions
When an eBay buyer pays with PayPal, he or she is covered with its fraud protection program. Tangible items sold on eBay that can be shipped (and are paid through PayPal) are covered to $200. (Intangibles, such as services, licenses, and other access to digital content aren't covered.) PayPal covers some items sold by the most reputable sellers up to $2,000 of the final selling price. The amount at which your sales are covered is indicated at the bottom of the Meet the Seller area on each listing page.
The plan covers only fraud, not damaged packages. The United States Postal Service offers insurance as an option, so this means if your package arrives damaged and isn't insured, the buyer is out of luck and you're going to get some bad feedback unless you make things right. The protection program covers eBay buyers only when they're defrauded, the item is never shipped, or the item is significantly different from the auction description. When you ship an item through the USPS, PayPal will accept a delivery confirmation number that has been scanned at arrival as proof of delivery. If the item you send is valued over $250, PayPal requires that you get a signature delivery confirmation to protect the seller. The policy does not cover sellers for anything — so don't ship that item until you're darn sure the check has cleared!
Once a buyer files a successful claim against you, the money they paid you is whisked out of your PayPal account immediately.