Quoting CIF or CIP: how much cargo insurance must the seller buy, and what is the difference? in detail
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.
Dear friend,
Welcome! This letter sets out what you need to know, plainly and in order.
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 | |
| 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; |
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.
Sources for this letter
Wishing you good business,
The mouwise team
Checked 2026-10-26
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