It is not illegal to send cash via US Mail, but it is (obviously) risky business. You can insure any package, but you have to be able to prove loss. This works for packages of merchandise that arrive damaged. It doesn't work for letters that never arrive.

The safe way to mail cash is via registered mail. Declare the contents to be cash, and insure for the proper value. USPS will insure for up to $25K. Request a return receipt, and you will have proof that the money arrived. This is the only sure way to do this, and it adds significant cost to the transaction.

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