Incoterms and Insurance Requirements

Insurance requirements vary depending on the Incoterm used in the sales contract. Understanding these requirements is crucial for both buyers and sellers to ensure proper coverage of goods during transit.

Insurance Requirements by Incoterm

CIF and CIP

Under CIF (Cost, Insurance, and Freight) and CIP (Carriage and Insurance Paid To), the seller is obligated to:

• Obtain insurance coverage for the goods
• Cover the goods up to the agreed destination
• Provide insurance documentation to the buyer
• Pay the insurance premium

Other Incoterms

For all other Incoterms:

• Neither party is obligated to provide insurance
• Insurance is optional but recommended
• The party bearing the risk typically arranges insurance

Risk Transfer and Insurance

Understanding when risk transfers is essential for insurance purposes:

• Insurance should be in place before risk transfer
• Coverage should match the risk transfer point
• Both parties should verify insurance coverage
• Insurance terms should be clearly specified

Best Practices

• Always verify insurance coverage
• Keep insurance documentation readily available
• Review insurance terms and conditions
• Consider additional coverage if needed
• Maintain records of insurance policies