Freight Forwarding & Incoterms: Key Terms Explained in Detail

Carriage and Insurance Paid To (CIP) is an Incoterm where the seller pays for transporting the goods to a named destination and arranges insurance coverage for the buyer’s benefit. It builds on CPT rules but adds an important layer of protection. The seller must secure insurance that meets the minimum requirements of Institute Cargo Clauses (A), which provides wider coverage than what is required under CIF. This ensures the buyer is financially protected if something happens during transit.

Under CIP, risk transfers from the seller to the buyer once the goods are handed over to the first carrier. This means the seller pays freight and insurance to the destination, but the risk is no longer theirs after the first carrier takes possession. This split between cost and risk is a key feature of CIP. It allows the buyer to receive insurance coverage even though the seller is not responsible for the risk during transport.

CIP can be used for any mode of transport, including multimodal shipments. The seller handles export procedures, main carriage, and insurance arrangements, while the buyer manages import clearance and local delivery at the destination. CIP is often chosen when the buyer wants insurance included in the purchase but prefers the seller to handle the logistics side. It brings convenience to international trade transactions.

Overall, CIP offers a balanced arrangement that combines freight cost coverage with insurance protection. It benefits buyers who prefer the seller to manage major logistics and insurance tasks. When both parties clearly understand when risk transfers and what insurance is included, CIP ensures smooth, predictable, and safer movement of goods across borders.