CIP Risk Transfer
As with all two-point clauses of the C-group, the transfer of risk and cost are at different points in the CIP Incoterm. The risk for the consignment is transferred to the buyer as soon as it is handed over to the first carrier, but the costs for the transport continue to be borne by the seller (until the destination). Only there does the buyer's responsibility for the final transport begin - typically starting with import processing and customs clearance. However, the buyer is also responsible for any transit via third countries. The buyer bears the costs and takes care of all formalities (regulated under CPT B7). As with other Incoterms, it is advisable to define the place of delivery and destination as clearly as possible. This avoids grey areas which can lead to disputes in the event of damage or loss.
CIP Insurance Coverage
CIP is one of the clauses that have been adapted within the scope of Incoterms 2020. The change refers exclusively to the required CIP insurance coverage. Previously, a minimum insurance cover was sufficient (clause C of the "Institute Cargo Clauses" or comparable ones such as the DTV Freight Insurance Conditions). Incoterms 2020 now require comprehensive insurance cover of clause type A (all risks). For the comparable Incoterm CIF (Cost, Insurance and Freight), which is intended exclusively for sea freight, insurance cover of clause type C remains sufficient.
CIP Insurance coverage and obligation to provide evidence
The sum insured must be equal to 110% of the price of the goods specified in the contract, payable in the currency used in the contract. The seller is obliged vis-à-vis the buyer to prove that the insurance has been taken out.
Attention: Sometimes it can happen that the country of destination requires that the insurance cover is taken out within the country or that non-licensed (non-admitted) insurers are prohibited. This can cause problems for the seller. In this case, one should use the Incoterm CPT in case of doubt, and the buyer takes over the conclusion of the insurance.
Continuous insurance cover for transport
It makes sense to take out insurance for all sections of the transport route - in other words: for seller and buyer alike. The CIP Incoterm mainly deals with the part of the route from handover to the first carrier, but the seller naturally has an interest in transport insurance up to this point of handover. In principle, of course, each contracting party can separately insure their own part of the route for which they bear the risk, according to the Incoterm CIP. However, damage can occur at the transfer of risk, and - at least from the point of view of the respective insurance companies - the responsibility cannot be clearly allocated. These potential disputes can be avoided by taking out a comprehensive insurance policy. Buyer and seller can agree on the respective share of the insurance costs.
Reading tip: Incoterms CIP and CPT are identical except for the topic of insurance. This section therefore focuses on the topic of insurance cover - other aspects of the Incoterm rules that apply to CIP are dealt with in more detail in our info text on Incoterm CPT.