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Insurance Guide › Incoterms & who insures
02 · INCOTERMS & INSURANCE

Who buys the cargo cover, decided by the Incoterm

International trade terms (Incoterms) set where cost, risk and obligations divide between seller and buyer. That dividing point determines who should buy the cargo insurance. Here are the 8 terms most relevant to cargo insurance under Incoterms 2020.

One line — Incoterms and insurance

The buyer carries the cargo insurance from the point risk transfers. Up to that point the seller bears the risk, so the seller may also need cover for their own leg.

Seller's duty to insure — 4 terms

Trade terms under which the seller is required, or expected, to arrange cargo insurance for the buyer.

CIF

Cost, Insurance and Freight

Price including freight + insurance

  • Seller pays freight + insurance
  • Risk transfers: when loading on board is complete
  • Seller insures with the buyer as the Assured
  • Sea only (use CIP for air / multimodal)
CIP

Carriage and Insurance Paid To

Price with carriage + insurance paid

  • Seller pays carriage + insurance to the named destination
  • Risk transfers: on delivery to the first carrier
  • Any mode of transport (air / multimodal)
  • Since the 2020 revision, ICC(A)-level cover is mandatory
DDP

Delivered Duty Paid

Delivered, duty paid

  • Seller bears all cost and risk to destination
  • Seller responsible through customs clearance
  • Insurance recommended (not required, but essential in practice)
  • The most favourable term for the buyer
DAP

Delivered At Place

Delivered at the named place

  • Seller bears carriage and risk to the named destination (buyer's premises)
  • Duty is on the buyer (the difference from DDP)
  • Insurance recommended for the seller
  • Any mode of transport

Buyer's duty to insure — 4 terms

Trade terms under which the buyer should arrange cargo insurance to protect themselves.

EXW

Ex Works

Ex factory

  • Seller only makes the goods available at the works
  • After that, all carriage / clearance / risk is on the buyer
  • Buyer must insure from the origin
  • The heaviest term for the buyer
FAS

Free Alongside Ship

Delivered alongside the vessel

  • Seller delivers alongside the vessel at the load port
  • Risk passes to the buyer once alongside
  • Buyer insures from alongside the vessel
  • Common for bulk / heavy lift
FOB

Free On Board

Delivered on board

  • Seller bears cost / risk until the goods are on board
  • Risk passes to the buyer once loading is complete
  • Buyer insures from the point of loading
  • Sea only · the most common term for Korean imports
CFR

Cost and Freight

Price including freight (insurance excluded)

  • Seller pays freight to destination
  • Risk transfers: on loading on board (same as FOB)
  • Insurance is on the buyer → the buyer insures
  • Sea only · CFR is CIF without the insurance

Matrix — who insures, at a glance

Incoterm Freight Insurance Risk transfer Who insures
EXWBuyerBuyerAt the worksBuyer
FASBuyerBuyerAlongside the vesselBuyer
FOBBuyerBuyerOn boardBuyer
CFRSellerBuyerOn boardBuyer
CIFSellerSellerOn boardSeller
CIPSellerSellerOn delivery to first carrierSeller
DAPSeller(seller advised)On arrival at named placeSeller
DDPSeller(seller advised)After customs clearance, on deliverySeller

Self-check — what is our trade term?

Contract says "CIF" and we are the buyer
The seller insures. The buyer need not buy separate cover — but obtain a copy of the policy and check the clauses.
Contract says "FOB" and we are the buyer
The buyer must insure from the point of loading. Instant quote available at cargoinsu.com.
Contract says "EXW" and we are the buyer
Insure the entire transit from the seller's works. Longest risk exposure → ICC(A) recommended.
Contract says "CIF" and we are the seller
The seller insures with the buyer as the Assured and assigns the policy to the buyer by endorsement.
Contract says "DDP" and we are the seller
The seller bears all risk and cost. Not strictly required, but insurance is essential to protect the seller.

Practical points

① CIF buyers: do not rely on the seller's cover

A seller's policy is often placed at the minimum level, ICC(C) or F.P.A (the legal minimum). If cargo value or exposure is high, the buyer should take out Difference in Conditions (DIC) cover or require the seller to insure on ICC(A).

② FOB: what about a loss before loading?

Under FOB the buyer's risk starts on loading. A loss before that (quay storage, handling) is the seller's risk. The buyer's policy attaches only after loading, so earlier loss must be claimed against the seller.

③ EXW is the riskiest term for the buyer

Risk is on the buyer from the seller's works: origin inland carriage, port handling, the sea leg, arrival, and onward carriage are all the buyer's responsibility. Confirm ICC(A) + additional risks + the warehouse-to-warehouse clause.

④ CIP 2020 — ICC(A) now mandatory

The 2020 Incoterms revision makes ICC(A)-level cover mandatory for CIP (previously ICC(C) was acceptable). CIF still allows ICC(C) (legally). State the clause in the contract.

How N2N's Incoterms advice is different

Enter your Incoterm when you request a quote at cargoinsu.com and we automatically suggest the clauses + additional risks that fit that trade term.

  • FOB buyer → ICC(A) + warehouse-to-warehouse cover from loading to destination
  • EXW buyer → ICC(A) + origin inland carriage + transhipment risk added
  • CIF buyer → review of the seller's policy clauses + analysis of whether DIC cover is advisable
  • CIP seller → ICC(A) applied automatically, reflecting the 2020 revision
← 01 Clauses Comparison 03 Policy period — warehouse-to-warehouse →