Seller pays freight and arranges all-risk cargo insurance — cost goes to destination, but risk passes at first carrier handover.
Carriage and Insurance Paid To (CIP) requires the seller to arrange and pay for both freight to the named destination and cargo insurance. A key change in Incoterms 2020: the seller's insurance obligation under CIP was upgraded to Institute Cargo Clauses A (all-risk cover) — the highest level of cargo insurance. Previously (Incoterms 2010), only minimum cover was required. Despite covering both freight and insurance costs to destination, risk still transfers from seller to buyer when the goods are handed to the first carrier at origin. CIP is appropriate for all transport modes and is the recommended C-term when the seller is in a stronger position to negotiate competitive insurance rates.
CIP is ideal when the seller has preferential cargo insurance rates (e.g., annual open cover policies) and can insure goods more cost-effectively than the buyer. It is commonly used in manufactured goods exports, pharmaceutical shipments, and high-value cargo where all-risk insurance is commercially necessary. CIP is also appropriate when the buyer's bank or letter-of-credit terms require the seller to provide an insurance certificate.
CIP is not suitable if the buyer already has comprehensive cargo insurance and does not want to pay (via the goods price) for insurance they cannot directly control. The buyer cannot easily make insurance claims under a policy they didn't arrange. If the buyer prefers to manage their own insurance, use CPT. If you want the seller to also bear the transit risk, use DAP or DDP.
Under Incoterms 2020, CIP requires the seller to arrange insurance complying with Institute Cargo Clauses A (or similar all-risk clauses), covering the full value of the goods plus 10% (110% total). This is the highest standard cargo insurance tier and covers all risks of physical loss or damage except specific exclusions (inherent vice, delay, war, strikes).
Incoterms 2010 required only minimum insurance (Institute Cargo Clauses C) under both CIP and CIF. Incoterms 2020 split these: CIP now requires all-risk cover (ICC A), while CIF retains the minimum cover (ICC C). The logic is that CIF is typically used for bulk commodities where minimum cover is standard trade practice, while CIP is used for higher-value manufactured goods where all-risk cover is appropriate.
The insurance policy must be transferable and made in favour of the buyer or other interested parties. The buyer should receive an insurance certificate or policy as part of the shipping documents. In practice, making claims on a seller-arranged policy can be more complex for the buyer — this is one reason buyers sometimes prefer to arrange their own insurance (use CPT).
Yes. Despite paying for freight and insurance all the way to the destination, the seller's risk exposure ends when goods are handed to the first carrier. The buyer bears the financial risk of total loss or damage during transit — but the seller's insurance is there to compensate. The insurance bridges the risk gap.
Under CIP, the buyer still handles import customs clearance and pays import duties at the destination. Under DDP (Delivered Duty Paid), the seller covers everything including import duties. DDP gives buyers a fully landed cost with no surprises; CIP leaves import costs to the buyer.
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