Carriage and Insurance Paid To (CIP): Definition & Meaning Explained

🌟 KEY TAKEAWAYS

The Carriage and Insurance Paid To (CIP) trade term indicates who’s responsible for transportation and insurance of goods.

This contract of sale is valid until the goods reach the agreed-upon destination.

The carrier in the agreement refers to any company that transports goods.

Carriage and Insurance Paid To (CIP) means that the seller takes all risks until the goods reach the first carrier at the point of shipment. Not the destination. The buyer assumes any risk once goods have been delivered to the first carrier.

Here, the seller bears the costs of carriage and all-risk freight insurance. But only until freight arrives at its destination. Insured transfers from seller to buyer agreement help reduce risk transfers. 

Any person or company that transports goods is the carrier. This includes the shipping company, railway company, airline, or trucking company.

What Does Carriage and Insurance Paid To (CIP) Mean?

Carriage and Insurance Paid to (CIP) is when a seller pays freight and insures goods to be delivered to an appointed seller at an agreed place. Once the goods have been delivered to the designated carrier, the seller takes a risk of any damage or loss. It is similar to Cost, Insurance, and Freight (CIF), but it is different.

Also, the seller contracts for insurance coverage to cover the buyer's loss or damage to the goods during carriage. CIP requires that the seller obtain minimum coverage. If the buyer wishes to have additional insurance coverage, they will need to either agree to this with the seller or make their own arrangements.

When Should You Choose CIP?

‍CIP is used most often for manufactured goods of higher value. It’s the seller’s responsibility to cover all aspects of transportation, including insurance.

Sellers using CIP are legally bound to insure the Total Declared Value of their goods at a rate of 110%.

Some buyers think there should be even more protection. As a buyer, you have the option to ask the seller to offer more coverage.

However, risk of loss is a big deal when buying items that need to be shipped. Depending on the mode of transport, any number of things could happen. The insurance costs help reduce risk of loss further.

Various modes of transport get used in shipping. As such, it's necessary to have some level of insurance cover. Even minimum insurance cover lets sellers insure their goods. And if they need extra insurance coverage, they can buy it at additional insurance charges.

Sellers must contact their insurance company to buy extra insurance coverage for their business. This will cover each mode of transportation.

Summary

This practice cements trust between buyer and seller. And in the event goods get damaged during shipping, the buyer has assurance that they will get compensated. Moreover, the insured items give the seller peace of mind if there’s a problem along the way.

Frequently Asked Questions about CIP

Who pays duty for CIP?

What is CIF and CIP?

What is the difference between CIP and DAP?