Both CIF and CIP include the word “Insurance,” which often leads businesses to assume that the seller bears all cargo risk until arrival. That assumption can create a coverage gap. The seller must arrange and pay for insurance, but cargo risk transfers to the buyer much earlier. The default cover is also different: CIF generally requires Institute Cargo Clauses (C), while CIP requires the broader Institute Cargo Clauses (A). Even “all risks” does not mean that every loss is covered. This article explains who buys the insurance, whose interest it protects, the minimum cover and insured amount, the risk-transfer point, the documents to review and the contractual errors to avoid under Incoterms® 2020.

Prepared by: TGIMEX · Updated: 21 July 2026 · Scope: CIF and CIP under Incoterms® 2020

QUICK FACTS

The seller arranges insurance

Under both CIF and CIP, the seller must arrange and pay for cargo insurance at the rule’s minimum level unless the parties agree otherwise.

Insurance protects the buyer’s risk

Risk transfers at the delivery point; the cover must allow the buyer or another party with an insurable interest to claim directly.

Different default cover

CIF defaults to ICC (C) or equivalent; CIP defaults to ICC (A) or equivalent, unless otherwise agreed or customary.

Minimum insured amount

The default minimum is 110% of the contract price in the contract currency.

Cost and risk are separate

The seller pays carriage and insurance to destination, but does not retain cargo risk until destination.

Illustration for Who Must Arrange Insurance under CIF and CIP? — Illustration of the logistics topic, document or operation discussed in the article.

SCOPE OF APPLICATION

This article applies where the sales contract expressly refers to CIF (named port of destination) Incoterms® 2020 or CIP (named place of destination) Incoterms® 2020. CIF is reserved for sea and inland-waterway transport. CIP may be used for any mode or multimodal transport.

It does not replace the full ICC rules, the insurance wording, sales contract, documentary credit or governing law. Fragile, temperature-controlled, high-value, used, war/strike-exposed or restricted-lane cargo may require cover beyond the default and an underwriting confirmation before the contract is concluded.

KEY TERMS

Term	Meaning	Operational role
CIF	Cost, Insurance and Freight to a named port of destination.	Sea/inland waterway only; risk passes when goods are on board at the port of shipment.
CIP	Carriage and Insurance Paid To a named place of destination.	Any mode; risk passes when goods are handed to the carrier at the agreed delivery point.
Institute Cargo Clauses (A)	Broad cover, commonly called “all risks,” subject to conditions and exclusions.	The CIP default under Incoterms® 2020 unless otherwise agreed/customary.
Institute Cargo Clauses (C)	Named-perils cover narrower than ICC (A).	The CIF default; it may be inadequate for some manufactured cargo.
Insurable interest	An economic interest exposed to loss if the goods are damaged or lost.	The buyer or another party with an insurable interest must be able to claim directly.
Policy / Certificate	The insurance policy or certificate evidencing cover.	Shows insured voyage, value, currency, claim rights, conditions and endorsements.
Additional cover	Extra protection such as war, strikes or cargo-specific extensions.	The seller assists at the buyer’s request if obtainable; the buyer normally bears the additional cost.

HOW THE INSURANCE OBLIGATION WORKS

1. The seller buys insurance for the buyer’s post-delivery risk

CIF and CIP are “C” rules. The seller delivers and transfers risk at origin, yet remains obliged to contract and pay for carriage and insurance to destination. The insurance is therefore arranged for the buyer or another party with an insurable interest after risk has transferred.

2. CIF and CIP transfer risk at different points

CIF: risk transfers when the goods are loaded on board the vessel at the port of shipment.
CIP: risk transfers when the seller hands the goods to the carrier at the agreed delivery point. Where several carriers are involved and no different point is agreed, the first-carrier point requires close attention.

The place stated after CIF or CIP is the destination to which the seller pays carriage and insurance; it is not automatically the risk-transfer point.

3. The default insurance levels differ

CIF defaults to ICC (C) or equivalent. CIP defaults to ICC (A) or equivalent. ICC (A) is broader but still contains exclusions, deductibles and policy conditions. Delay, inherent vice, insufficient packing, war, strikes, insolvency and other matters must be checked in the actual wording.

4. Amount and insurance evidence

Unless otherwise agreed or customary, the minimum insured amount is the contract price plus 10%—110%—in the contract currency. The seller must provide a policy, certificate or other evidence enabling the buyer or another party with an insurable interest to claim directly.

Control point: “The seller buys insurance” does not mean “the seller bears every loss until destination.” After delivery, the loss is the buyer’s risk; recovery depends on the wording, evidence, exclusions and claim procedure.

CIF AND CIP COMPARISON

Criterion	CIF	CIP	Control point
Who arranges insurance?	The seller at the seller’s cost.	The seller at the seller’s cost.	State Incoterms® 2020 and the named destination.
Mode	Sea or inland waterway only.	Any mode, including multimodal.	CIP is generally more suitable where container cargo is delivered to a terminal/carrier.
Risk-transfer point	On board at the port of shipment.	Handed to the carrier at the agreed delivery point.	Specify delivery and destination separately.
Seller-paid carriage	To the named destination port.	To the named destination place.	Paying to destination does not move the risk point.
Default insurance	ICC (C) or equivalent—narrower.	ICC (A) or equivalent—broader.	Match cover to cargo, lane and exclusions.
Minimum amount	110% of contract price in contract currency.	The same.	Also check the L/C, contract and insurer requirements.
Direct claimant	Buyer or another party with an insurable interest.	The same.	Check name, endorsement/assignment and document form.
Additional cover	Seller assists if requested and obtainable; buyer bears extra cost unless agreed otherwise.	The same.	Review war, strikes, theft, temperature, rust, leakage and breakage.
Customs	Seller clears export; buyer clears import.	The same.	Insurance does not replace permits or compliance duties.

DOCUMENTS AND DATA TO CHECK

Document/data	Prepared/issued by	What to verify	When
Sales contract / PO	Seller and buyer	CIF/CIP, 2020 edition, destination, delivery point, cover, amount, claimant and additional cover.	Before signing and quoting.
Quotation / insurance slip	Insurer or broker	ICC (A)/(C), voyage, cargo, mode, amount, currency, deductible, exclusions and validity.	Before shipment.
Policy / Certificate	Insurer/broker	Policy number, voyage, value, currency, claims contact, direct claimant, issue date and endorsement.	Immediately after issue.
Invoice	Seller	Contract value and currency used for the minimum 110% amount.	Before certificate issuance.
Transport document	Carrier/NVOCC/forwarder	Receipt, loading, on-board date, destination, container/AWB and voyage within the insured transit.	At draft and final-document review.
Packing List / cargo data	Seller	Commodity, packages, weight, packing, fragile/temperature/DG characteristics.	Before underwriting and packing.
L/C or payment terms	Bank/buyer	Insurance document, copies, issue date, percentage, currency, endorsement and required risks.	Before accepting the credit and presenting documents.
Claim instructions	Insurer/survey agent	Notification deadline, survey, evidence, reservation of rights and loss-mitigation steps.	Before shipment and immediately after a loss.

APPLICATION PROCESS

Select the correct rule: CIF for suitable sea/inland-waterway port-to-port movements; CIP for road, air, rail, multimodal or container delivery to a carrier before loading on board.
Name the locations precisely: specify delivery point where needed, destination and “Incoterms® 2020.”
Assess cargo risk: commodity, packing, transshipment, temperature, theft, war/strikes and potential severity.
Agree the cover: ICC (C), ICC (A) or broader; define deductible, extensions and exclusions.
Calculate the amount: default minimum 110% of contract price in contract currency; reconcile the L/C and special agreement.
Ensure cover is effective from the risk-transfer point: provide complete cargo data and confirm that insurance starts no later than delivery and continues to at least the named port/place of destination. Policy issuance may follow the insurer’s process, but there must be no uninsured gap when risk transfers.
Review the certificate: contract, invoice, transport document, voyage, amount, date, claimant and endorsement.
Deliver usable evidence: ensure the buyer or party with an insurable interest can claim directly.
Prepare the loss protocol: notify insurer, reserve rights against the carrier, arrange survey and mitigate loss immediately.

Recommended output: a responsibility matrix stating buyer/seller duties, wording, amount, voyage, deductible, exclusions, claim contact, required documents and payer of additional cover.

RISKS AND COMMON ERRORS

Error	Cause	Impact	Control
Assuming risk passes at destination	Confusing the cost destination with delivery.	The buyer fails to prepare cover or claims correctly.	State delivery/risk point separately from named destination.
Using CIF for a multimodal container chain	Choosing by habit because a sea leg exists.	Terminal delivery does not align with the on-board risk point.	Consider CIP where delivery is to a carrier/terminal.
Treating ICC (A) as literally every risk	Ignoring exclusions, deductible and warranties.	Claim reduction or denial.	Review the full wording and extensions.
Using ICC (C) for sensitive finished goods	Relying only on CIF’s default minimum.	Some theft, breakage or particular loss may fall outside cover depending on the event.	Agree ICC (A) or suitable equivalent cover.
Buyer cannot claim directly	Wrong name, missing endorsement/assignment or unusable evidence.	Difficulty proving claim rights.	Check insured/beneficiary and transfer mechanism.
Amount/currency mismatch	Preliminary invoice or unreviewed L/C.	Underinsurance or documentary discrepancy.	Reconcile contract value, currency, percentage and bank requirements.
No war/strikes cover	Assuming ICC (A)/(C) includes all such risks.	Coverage gap on exposed routes.	Request additional quotation early and review cancellation/geographic limits.
Late loss notification	No claim protocol or waiting for the seller.	Lost evidence and weakened recovery against carrier/insurer.	Buyer notifies insurer/survey agent, reserves rights and mitigates promptly.

AUTHORITATIVE SOURCES

Incoterms® are ICC contractual rules and apply only when incorporated into the contract. Actual recovery also depends on the policy wording, governing law and shipment documents.

Official source	Purpose	Application
ICC – Incoterms® 2020	Edition, structure and CIF/CIP insurance-level distinction.	CIF defaults to ICC (C); CIP defaults to ICC (A), subject to agreement.
ICC Library – CIP, A5 Insurance	Seller’s insurance duty, 110%, currency, direct claim and additional cover.	Any mode; verify carrier delivery and destination.
ICC Library – CIF, A5 Insurance	ICC (C), 110%, evidence and insured transit.	Sea/inland waterway only.
ICC Academy – CIP or CIF?	Mode, risk point and cover comparison.	Useful for container and multimodal selection.
ICC Academy – “C” and “D” Rules	Explains delivery at origin while seller pays to destination.	Prevents confusion between cost and risk.
ICC – UCP 600, Article 28	Insurance-document requirements under a documentary credit, including date, currency and coverage where the credit is silent.	For L/C transactions, distinguish UCP 600 document compliance from the Incoterms® minimum and follow the express credit terms.
ICC – Practical Wallchart	Quick overview of obligations, costs and risks.	Use together with the full rules.

ICC Incoterms® 2020 CIP rule CIF rule

FAQ

1. Must the buyer buy separate insurance under CIF or CIP?

The seller must buy the default minimum. The buyer should arrange additional or separate cover where the default does not meet the cargo, route, value or bank requirements.

2. Does seller-paid insurance mean the seller bears risk to destination?

No. Under CIF risk passes on board; under CIP it passes upon delivery to the carrier. The seller still pays carriage and insurance to destination.

3. Does CIF require ICC (A)?

Not by default. CIF requires ICC (C) or equivalent unless the contract, L/C or parties require broader cover.

4. Does CIP cover every risk?

No. ICC (A) is broad but remains subject to exclusions, deductibles and compliance with policy conditions.

5. Who pays for war and strikes cover?

If requested by the buyer and obtainable, the seller assists in arranging it; the buyer bears the additional cost by default unless otherwise agreed.

6. What is the 110% based on?

The contract price plus 10% in the contract currency. Check the L/C and any special agreement.

7. After damage, should the buyer claim against the seller or insurer?

For a post-delivery loss, the buyer or another party with an insurable interest generally claims directly under the policy and reserves rights against the carrier. Seller liability depends on whether the seller complied with the contract and insurance duty.

APPLICATION NOTE: Do not write merely “CIF/CIP includes insurance.” Agree the wording, amount, transit, deductible, exclusions, war/strikes, direct claimant and documents. For L/C transactions, align the credit, Incoterms® rule and policy before shipment.

TGIMEX IMPLEMENTATION SUPPORT

TGIMEX helps businesses turn the article into a shipment-ready checklist, covering input-data review, dossier preparation, milestone control, and coordination with the relevant parties.

Convert guidance into checks

Assign an owner and deadline to every operational control point.

Reconcile shipment data

Compare booking, transport, commercial, customs, and delivery evidence.

Manage operational risk

Record discrepancies, actions, and decision evidence to prevent recurrence.

Discuss your shipment dossier

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