CIP Incoterms: Carriage and Insurance Paid To, With the 2020 Cover Change
CIP, Carriage and Insurance Paid To, is CPT with an insurance obligation attached. The seller contracts and pays for carriage to a named destination and also buys cargo insurance for the buyer's benefit.
The insurance change that matters
This is the most consequential change in the 2020 edition.
Under Incoterms 2010, CIP required only minimum insurance cover, broadly Institute Cargo Clauses C. Under Incoterms 2020, CIP requires cover at the Institute Cargo Clauses A level, which is all risks. CIF was deliberately left at the minimum.
The reasoning is that CIF is used mainly for bulk commodities where minimum cover is the market norm, while CIP is used for manufactured goods where buyers expect proper protection.
Two practical consequences. Sellers quoting CIP on 2020 terms carry a higher insurance cost than on 2010 terms, and should price accordingly. Buyers get materially better cover under CIP than under CIF, which is worth knowing when the two look interchangeable on a quotation.
Where risk passes
As with CPT, risk passes when the goods are handed to the first carrier, at origin. The insurance exists precisely because the buyer carries the risk for the main journey. The seller buys the policy, but the buyer is the party protected by it.
The cover must run to the named destination and the seller must provide the buyer with the policy or certificate so the buyer can claim directly.
CIP compared with CIF
Both include carriage and insurance. Three differences matter.
- Transport mode. CIP works for any mode. CIF is restricted to sea and inland waterway.
- Insurance level. CIP requires all risks. CIF requires only minimum cover.
- Risk point. Under CIP risk passes at the first carrier. Under CIF it passes when the goods are on board the vessel.
For containers, CIP is correct and CIF is not, for the same reason FOB is wrong for boxes. We set out the full comparison in the Incoterms guide, and the 2020 changes in what changed in Incoterms 2020.
When to use CIP
CIP suits buyers without their own cargo insurance who want the protection built into the purchase, and sellers who want to offer a comprehensive delivered price. It is a sensible default for Gulf importers buying manufactured goods where the seller has better freight rates.
If you already hold an open marine policy, you may be paying twice. In that case CPT plus your own cover is usually cheaper.
Where this rule sits
CIP is the insured version of CPT and the any mode counterpart to CIF. Since 2020 it also carries the stronger insurance requirement of the two, which makes it the better rule for valuable manufactured cargo.
For the full set, see our guide to all 11 Incoterms 2020 rules, or work through how to choose the right rule for a given shipment. Our Mastering Incoterms 2020 course covers every rule with worked examples from Gulf trade lanes.
Frequently asked questions
What does CIP mean in Incoterms?
Carriage and Insurance Paid To. The seller pays for carriage to a named destination and buys cargo insurance for the buyer benefit. Risk passes at the first carrier.
What insurance level does CIP require?
Under Incoterms 2020 CIP requires all risks cover at the Institute Cargo Clauses A level. Before 2020 it required only minimum cover.
What is the difference between CIP and CIF?
CIP works for any transport mode and requires all risks cover. CIF is for sea and inland waterway only and requires only minimum cover. Risk also passes at different points.
Who claims on the insurance under CIP?
The buyer. The seller buys the policy but the buyer carries the risk, so the seller must provide the policy or certificate so the buyer can claim directly.
Should we use CIP or CPT?
Use CIP if you want insurance included. Use CPT if you already hold your own cargo cover, since paying the seller to insure as well is duplication.
