Two questions come up whenever a container arrives damaged. The buyer asks who is paying, and the seller discovers that the insurance included in a CIF price covers less than expected. These are the seven questions we answer in that conversation, in order.
Q1. In CIF, what does the seller's insurance actually cover?
CIF requires the seller to insure the cargo for the buyer's benefit, but only at minimum cover: Institute Cargo Clauses (C), for 110% of the invoice value. It is a named-perils policy, not an all-risks one. If the contract does not specify a clause, C is what you get.
Q2. What does ICC C leave out?
Theft and non-delivery, fresh water and rain damage, breakage not caused by a major casualty, damage from bad packing, inherent vice, delay, and loss of market. C responds to the large events — stranding, sinking, fire, collision, jettison — and to very little else. ICC B adds earthquake, volcanic eruption, water damage from sea, lake or river, and washing overboard. ICC A is all risks subject to the exclusions in the clause.
Q3. Risk passes on board, so why does the insurance run to the warehouse?
Risk and insurance are two different lines. Under CIF the risk passes when the cargo is on board, and the buyer is the party with an insurable interest from that moment — which is why the policy is assigned to the buyer. The cover itself normally runs warehouse to warehouse, ending at the destination warehouse or after 60 days from discharge, whichever comes first.
Q4. Under FOB, the buyer insures. Can the seller ignore insurance?
No. Before the cargo is on board, the risk is still the seller's, and the buyer's marine policy generally does not respond to a loss at the origin warehouse or during inland haulage. Sellers shipping FOB should either buy their own cover for the pre-shipment leg or confirm in writing when the buyer's cover attaches.
Q5. Who insures under DAP and DDP?
The seller carries the risk to the named place, so the seller should insure it. Two things are often missing: the insurance is not included in the DDP price, and nobody checks the sum insured against the duty-paid value, which is higher than the FOB value by freight, insurance and duty. Ask for the certificate and read the insured amount.
Q6. What documents does a claim need?
- Original policy or certificate, and the endorsement chain if it was assigned
- Bill of lading, commercial invoice and packing list
- Survey report from the carrier's or insurer's surveyor, plus photos of the damage and the container
- A written notice of claim to the carrier at the time of delivery, and to the insurer without delay
- Correspondence with the carrier, which the insurer will ask for before paying
Watch the clocks: notice to the carrier is due when the loss is discovered, and legal action against the carrier is usually barred after one year. Do not wait for the insurer to settle before writing to the carrier.
Q7. Why is the settlement less than the loss?
- A deductible applies per claim, and franchise clauses work differently from deductibles.
- Under-insurance: if the sum insured is below the insured value, the claim is paid in proportion.
- General average: if the ship sacrifices cargo or incurs costs to save the voyage, all cargo owners contribute.
- Depreciation and salvage proceeds are deducted where they apply.
| Cover | What it responds to | Typical use |
|---|---|---|
| ICC C | Major casualties: stranding, sinking, fire, collision, jettison, discharge at a port of distress | Minimum for CIF; bulk and low-value cargo |
| ICC B | C plus earthquake, sea or river water, washing overboard | Machinery, packed goods on deck |
| ICC A | All risks except those expressly excluded | High-value, fragile, electronics, project cargo |
If you are writing a term into a contract or checking a policy you have already been issued, send the Incoterm, the cargo value and the clause to us on WhatsApp. We will tell you what the cover does not pay for, before a loss makes the point.