Quoting CIF or CIP: how much cargo insurance must the seller buy, and what is the difference?
Under the ICC's Incoterms® 2020 rules (in use from 1 January 2020): under CIF, the seller's cargo insurance defaults to at least Institute Cargo Clauses (C), and the parties may agree on higher cover; under the Incoterms 2020 default, CIP requires a higher level of cover, compliant with Institute Cargo Clauses (A) or similar clauses, so two "insurance included" quotes are not the same. Insured amount: the ICC's public explanation states that CIP cover must be at least 110% of the contract price; the full CIF wording on the insured amount is still to be checked. State the Incoterms version, insured amount and currency in the contract; the policy must meet the contract's insurance obligation, and an under-insured policy does not reduce the seller's contractual duty. Also, paying freight and insurance to destination does not mean the seller carries the risk to destination; check the risk-transfer point under the chosen rule.
- Applies to
- Chinese sellers quoting CIF or CIP and buying cargo insurance on the buyer's behalf.
Insurance under each rule
| Rule | Transport | Seller's insurance (default) | Source |
|---|---|---|---|
| CIF (Cost, Insurance and Freight) | Sea and inland waterway | At least Institute Cargo Clauses (C); higher cover can be agreed | ICC Incoterms 2020 overview |
| CIP (Carriage and Insurance Paid To) | Any mode | Institute Cargo Clauses (A) or similar; at least 110% of the contract price; risk passes when goods are handed to the carrier | Same; ICC Academy: CPT or CIP |
The Institute Cargo Clauses are standard London market terms: clause (A) gives the widest cover, while clause (C) covers only listed major risks. What is and isn't covered depends on the policy wording.
What you can do yourself
- Before quoting, agree with the buyer whether it is CIF or CIP, and whether cover above the default is needed; put it in the contract.
- When insuring, put the agreed clauses, insured amount, currency and beneficiary in the policy, and give the policy to the buyer.
- If there is a loss, notify the insurer as the policy requires and keep evidence (photos, survey reports, carrier-signed exception notes).
- Editorial suggestion: for air, courier or consolidated small shipments, CIP or another rule usually fits better; CIF is only for sea and inland waterway.
When to use a licensed professional
- For high-value or fragile goods, or large contracts, ask a licensed insurance broker about clauses and insured amount.
- If the insurer refuses or underpays a claim, talk to a maritime lawyer.
Check before you pay, and warning signs
- If a forwarder offers to "add insurance", ask for a written policy or certificate showing the insured, beneficiary, clauses and deductible.
- A receipt with no policy is a warning sign.
Unknowns
- The minimum insured amount under CIF: in the ICC's paid text; not checked here (the CIP 110% figure comes from the ICC's public explanation, not the full paid text).
- Individual insurers' terms and rates: not listed.
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