Short Overview of the Incoterms®
Purpose, Use & Relevance for Cargo Insurance
The Incoterms® (International Commercial Terms) are globally recognized trade rules issued by the International Chamber of Commerce (ICC). They define in a clear and uniform manner which party is responsible for delivery, costs, risks and, where applicable, cargo insurance in international trade. The current version, Incoterms® 2020, consists of 11 rules.
What do the Incoterms® regulate?
The Incoterms® set out:
Place of delivery and obligations of buyer and seller
Cost allocation along the transport chain
Transfer of risk for loss or damage
Responsibilities related to transport documents
• In certain rules (e.g., CIF and CIP), an explicit obligation for the seller to procure cargo insurance
They provide legal clarity and reduce misunderstandings—especially in cross-border trade scenarios that follow the principle of shipment sales.
Insurance for CIF / CIP
Main groups of the Incoterms®
The 11 Incoterms® 2020 are divided into four groups (E, F, C, D) based on who organizes and pays for which part of the transport. Particularly relevant for insurance are:
- CIF – Cost, Insurance and Freight
- CIP – Carriage and Insurance Paid To
Under these rules, the seller must arrange transport insurance for the goods.
Cargo insurance & insurable interest (including third party interest)
Transport or goods insurance covers any financial interest in the goods—regardless of whether it belongs to:
- the insured party (own interest), or
- a third party (e.g., the buyer under CIF or CIP terms
This means that a policyholder may insure goods for the account of another party. Even if the policyholder does not carry the risk under the sales contract, the insurer will still indemnify the loss upon request of the policyholder or the party actually affected.
Important:
For CIF/CIP shipments, it must be checked whether insurance for the destination country may legally be placed abroad, as certain jurisdictions restrict foreign insurers.
We bring light into your international supply chain
Take advantage of our expertise to ensure that your delivery terms are legally compliant and economically optimal.
