CIP (Carriage and Insurance Paid To) is the Incoterm under which the seller arranges and pays for both carriage and cargo insurance to a named destination. As with CPT, the risk of loss or damage transfers from seller to buyer when the goods are handed over to the first carrier, even though the seller is paying freight and insurance through to destination.
The key difference between CIP and CPT is the insurance obligation. Under CIP, the seller must:
- Contract and pay for cargo insurance covering the buyer's risk from the point of risk transfer to the named destination
- Procure cover for at least 110% of the contract value (the standard "value plus 10% notional profit")
- Provide the buyer with the insurance certificate or policy
Incoterms 2020 major change — Under Incoterms 2020, CIP requires the seller to purchase Institute Cargo Clauses (A) (all-risks) cover, up from Clauses (C) (limited perils only) in Incoterms 2010. This brings CIP insurance in line with what most commercial buyers actually need.
Compare CIP to CIF, the sea-only equivalent. CIF (under both 2010 and 2020) requires only Institute Cargo Clauses (C), creating an inconsistency — CIF buyers of high-value cargo often need to top up to an "all risks" policy themselves, while CIP buyers do not.
CIP is well-suited to high-value containerized cargo, air freight, and other multimodal shipments where the seller has better insurance market access than the buyer. The parties can agree to a higher insurance level if needed, with the increased premium typically reflected in the sale price.