A Commercial Invoice value of USD 100,000 does not automatically mean that the cargo should be insured for exactly USD 100,000. Freight, insurable costs, an agreed uplift, the Incoterms® rule, documentary-credit requirements and the valuation wording in the policy can all change the basis. A wrong basis may leave the cargo underinsured, charge premium on an unsupported excess, or restrict recovery precisely when a claim occurs. This article separates invoice value, insurable value, sum insured and claim payment, then explains practical formulas, data controls and the situations in which the insurance contract must override a generic calculation.

Operational reference for importers, exporters, procurement, finance and logistics | Updated 21 July 2026

QUICK FACTS

NOT THE SAME AS INVOICE VALUE

Invoice value is an input. Freight, accepted costs and the agreed uplift may change the sum insured.

110% IS NOT UNIVERSAL

The 110% level commonly appears under CIF/CIP Incoterms® 2020 and UCP 600 documentary-credit practice, but another contract may require a different basis.

PREMIUM RATE IS NOT THE UPLIFT

The premium rate prices the cover. A 10% uplift expands the value insured; it is not the insurance rate.

SUM INSURED IS NOT AN AUTOMATIC PAYOUT

Recovery depends on the actual loss, covered risks, exclusions, deductible, underinsurance rules and contractual limits.

Illustration for How Is Cargo Insurance Value Determined? — Illustration of the logistics topic, document or operation discussed in the article.

SCOPE OF APPLICATION

This article covers cargo insurance for sea, air, road, rail and multimodal movements, including single-shipment policies and open-cover declarations. Where the contract or journey is marine insurance, the specific rules of Viet Nam Maritime Code must be considered first; other movements require the governing insurance law and policy wording.

It does not calculate a specific claim without the policy wording, endorsements, survey evidence and governing law.
Customs value and accounting cost are not automatically the insurance value.
Used machinery, project cargo, high-margin goods and valued policies require specific agreement with the insurer.

KEY TERMS

Term	Meaning	Operational role
Invoice value	The goods price shown in the sales contract or Commercial Invoice.	Starting data that may exclude freight, insurance and other costs.
Insurable value	The economic value accepted as the basis of the interest to be protected.	Defines which value components belong in the insurance basis.
Sum insured	The amount stated in the policy or insurance certificate.	A major liability limit, but not an automatic claim payment.
Uplift	A percentage added to the accepted value base for anticipated profit or reasonable incidental costs.	Often 10% in defined trade terms, but subject to the contract.
Premium rate	The rate used by the insurer to price the cover.	Premium is commonly calculated on the sum insured, plus applicable taxes or charges.
Deductible	The portion of a covered loss retained by the insured.	Reduces recovery even where the sum insured is adequate.

VALUATION MECHANISM

There is no single formula for every mode or governing law. First identify the governing contract, the economic interest to be protected, the insured transit and the valuation basis accepted by the insurer.

For marine insurance under Article 311 of Viet Nam Maritime Code:
Cargo insurable value = invoice value at the place of loading or market value at the place and time of loading + insurance premium + carriage charges + estimated profit where included.

Where the policy uses an uplift:
Sum insured = policy-accepted value base × (1 + agreed uplift).

These are not interchangeable universal formulas. The 110% requirement under CIF/CIP Incoterms® 2020 is the seller’s minimum insurance obligation based on the contract price, unless otherwise agreed. Under a documentary credit subject to UCP 600, Article 28 uses at least 110% of CIF/CIP value when the credit is silent and provides a separate fallback where that value cannot be determined from the documents.

Conditional example:
If the policy accepts invoice USD 100,000 plus freight USD 5,000 as the base and allows a 10% uplift, the reference sum insured is USD 105,000 × 110% = USD 115,500.

This is only an agreed-method illustration. Do not add freight, premium or uplift again where they are already embedded in a CIF/CIP or other contract price. If premium forms part of the insurable value, obtain the insurer’s gross-up calculation to avoid a circular estimate.

Control point: every “110%” instruction must identify 110% of contract price, CIF/CIP value, invoice value or another agreed value, together with currency, route and coverage clauses.

COMMON VALUE BASES COMPARED

Basis	Components	Use	Control point
Article 311 Maritime Code basis	Invoice at loading or market value at place/time of loading + premium + carriage + possible estimated profit.	Marine insurance governed by Viet Nam law.	Separate insurable value from sum insured; anticipated profit requires support and acceptance.
Invoice value	Goods price only.	Where expressly accepted by the policy or contract.	May omit freight, premium or another insurable interest.
CFR/CPT-based value	Goods and carriage to destination, excluding insurance.	Buyer-arranged cover for CFR/CPT or similar cost structures.	Lock the destination point and avoid duplicated local charges.
Contract price + 10%	Contract price plus at least 10%.	Default seller obligation under CIF/CIP Incoterms® 2020 unless otherwise agreed.	Does not replace policy wording; CIF and CIP have different default coverage levels.
110% CIF/CIP value under UCP 600	Minimum under Article 28 when the credit is silent.	Only for documentary credits incorporating UCP 600.	Use Article 28 fallback where CIF/CIP value cannot be determined; do not default to 110% of invoice.
Agreed/declared value	Value declared and accepted by the insurer.	Project machinery, special cargo or evidenced economic interest.	An inflated declaration does not guarantee recovery above insurable value.
Replacement/destination value	Replacement cost or destination value.	Only where expressly accepted by the policy.	Do not use expected sales value where the wording protects purchase cost and carriage only.

DOCUMENTS AND DATA TO CHECK

Document/data	Issuer	Purpose	Fields to reconcile
Sales contract / purchase order	Buyer and seller	Price, Incoterms®, currency and insurance obligation.	Contract price, named place/port, insurance clause.
Commercial Invoice	Seller	Goods value and any freight/insurance shown.	Currency, total amount and included cost components.
Booking / freight quotation	Carrier, NVOCC or forwarder	Freight and transport charges forming part of the base.	Lane, endpoints, cargo, equipment and validity.
Policy / Insurance Certificate	Insurer or authorised issuer	Sum insured, route, clauses, exclusions and deductible.	Amount, currency, voyage, commodity, clauses and deductible.
Letter of Credit and amendments	Issuing bank / applicant	Minimum cover, currency, documents and risks required.	Percentage, CIF/CIP basis, originals and shipment date.
Cost allocation sheet	Finance / logistics	Prevents omitted or duplicated freight, premium and local charges.	Component, payer, date and source document.

PROCESS BEFORE PLACING COVER

Identify the insurable interest: determine who bears the cargo risk and from which contractual milestone.
Lock the goods price: use the final contract, PO and invoice rather than an obsolete proforma.
Map logistics components: identify freight, surcharges and costs already embedded in the purchase price.
Read Incoterms® and L/C requirements: verify any 110% level, coverage clause, currency and route requirement.
Agree the uplift: 0%, 10% or another level must be supported by the contract or policy.
Confirm the insurer’s method: especially where premium forms part of the value base or cargo has a special declared value.
Check the certificate before ETD: cargo, voyage, amount, currency, clauses, deductible and attachment date.
Retain the calculation trail: keep source documents and version history for claim and audit purposes.

RISKS AND COMMON ERRORS

Error	Cause	Possible impact	Control
Using 110% of invoice for every shipment	One internal formula is applied universally.	Freight may be omitted or the contract basis may be wrong.	Define the base value before applying any percentage.
Double-counting freight or premium	A CIF/CIP price is grossed up again.	Unnecessary insured amount and premium.	Create a component map and mark included items.
Confusing premium rate with uplift	Pricing and valuation percentages are mixed.	Wrong premium or wrong sum insured.	Maintain separate fields for premium rate and value uplift.
Ignoring the L/C	Cover is purchased only by invoice or Incoterms®.	The insurance document may be discrepant.	Check UCP 600 Article 28 and the actual credit wording.
Underinsurance	Costs are omitted or premium is minimised.	Proportionate recovery may apply under law or policy.	Compare the sum insured with the accepted value at inception.
Unsupported overvaluation	Expected profit is added without agreement.	The excess may not be recoverable.	Agree the value and retain economic evidence.
Currency mismatch	Policy currency differs from contract or L/C.	Exchange-rate exposure or document discrepancy.	Lock currency and conversion method before issue.

OFFICIAL AND LEGAL SOURCES

For marine insurance governed by Viet Nam law, the Maritime Code is the specific source on insurable value and sum insured. The Insurance Business Law provides the general property-insurance framework. Incoterms® and UCP 600 operate only when incorporated into the sales contract or documentary credit and do not replace the insurance wording.

Source	Relevant rule	Operational role
Viet Nam Maritime Code 95/2015/QH13	Article 311 defines cargo insurable value; Article 312 addresses sum insured, underinsurance and excess above insurable value.	Specific legal source for marine insurance within its scope.
Insurance Business Law 08/2022/QH15	Article 45 on sum insured; Articles 47–48 on over/under-value property insurance; Article 51 on indemnity basis.	General legal framework, applied according to scope and relationship with specialised law.
Incoterms® 2020 – ICC	CIF and CIP require seller cover of at least contract price plus 10%, in contract currency unless otherwise agreed; default coverage levels differ.	Allocates seller/buyer obligations but does not determine the whole claim entitlement.
UCP 600 Article 28 – ICC	Where the credit is silent, insurance must be at least 110% of CIF/CIP value, with a fallback basis where that value cannot be determined.	Document examination where the credit incorporates UCP 600.
Policy / Insurance Certificate	Sum insured, clauses, deductible, transit, exclusions, beneficiary and governing law.	Direct controlling source for the shipment and claim.

Viet Nam Maritime Code Insurance Business Law Incoterms® 2020 UCP 600

FAQ

Is cargo insurance value always 110% of CIF value?

No. The 110% level appears in defined CIF/CIP and UCP 600 contexts. The actual policy may use another agreed base or percentage.

How much cover is needed for a USD 100,000 invoice?

The invoice alone is insufficient. Freight, Incoterms®, destination, L/C wording, uplift and the insurer’s accepted basis must be known.

Does a higher sum insured guarantee a higher payout?

No. Recovery still depends on actual loss, covered risks, exclusions, deductible, evidence and contractual or legal limits.

Can customs value be used as insurance value?

Not automatically. Customs value serves tax purposes and is only a reference where the policy accepts it and its components match the protected interest.

Should destination local charges be included?

Only where they form part of the insurable economic interest and the policy permits them. Many charges arise outside the insured transit or after the loss.

What must be checked for insurance under an L/C?

Currency, amount, coverage terms, transit range, attachment date, originals and any war, strike or other specific risks required by the credit.

On what amount is premium calculated?

Commonly on the sum insured, but the insurer’s quotation and policy schedule control. Do not infer the rate or tax treatment.

APPLICATION NOTE: The formulas are an operational framework, not a mandatory method for every insurer or governing law. Marine insurance under Viet Nam law requires separate review of Articles 311–312 of the Maritime Code; other cargo insurance must follow the governing law and policy. Before issue, lock contract price, Incoterms®, L/C, invoice, freight, premium, uplift, route, clauses, deductible and currency. Claim payment still depends on actual loss, coverage and evidence.

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