There is now an important difference between Incoterms 2010 and Incoterms 2020
Only two Incoterms rules (CIF, CIP) refer to freight insurance, which is to be arranged and paid for by the seller.
For the other rules, each party makes a commercial decision as to whether to insure for the part of the journey where they are “on risk”
The level of cover mandated by the CIF rule is minimal – Institute Cargo Clauses (C). However for the CIP rule, there is a higher level of cover – Institute Cargo Clauses (A)
The rationale is that in general, manufactured goods will require a higher level of insurance cover than commodities
In all cases, the parties may choose to specify a different level of insurance cover within their commercial agreement
All freight insurance usually excludes consequential loss, e.g. the knock-on effects of buyer missing a contract deadline or a sales season. This risk can sometimes be included by agreement with the insurer.
So the risks to be covered should be discussed and then incorporated into the commercial agreement.
Other considerations for CIP and CIF
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