Question

What insurance coverage is required under CIF or CIP Incoterms rules? Explain which risks are not covered, and how an importer can still protect itself against them.

Pg. 376 question #6 International Logistics: The Management of International Trade Operations, 5th edition (2017) by David Pierre Publisher: Cicero Books LLC ISBN: 978-0989490641

Answer 1

Insurance coverage required under CIF or CIP Incoterms rules is as follows:

• Insurance coverage required under CIF/CIP rules is Marine cargo insurance – until the port of destination- to cover for the potential losses during transportation by sea. One can opt for minimum or maximum cover (under Coverage C or A of Institute Cargo clauses)- though International chamber of commerce specifies only Minimum cover. Further, the amount insured must be at least 110 percent of the value of goods.
• The only difference being that CIF applies to only sea based transportation, CIP applies to all/multi-modes of transportation.

The risks which are not covered are as follows:

• Insurance amount being in-adequate as rules mandate only MINIMUM cover- in this case, to cover their risk, one may need to buy MAXIMUM cover and pay extra cost for it