Incoterms® 2020 and cargo insurance: who bears the risk?

Last reviewed: 4 August 2026

Incoterms® 2020 rules identify delivery, allocate certain costs and establish when the risk of loss or damage transfers from seller to buyer. However, only CIF and CIP require the seller to arrange insurance. Under every other rule, the party bearing the risk should decide how to protect its interest, because an Incoterms® rule does not create insurance cover by itself.

What Incoterms® rules cover—and what they do not

The eleven rules published by the International Chamber of Commerce (ICC) allocate specific obligations in a sale of goods: delivery, transfer of risk, carriage, certain costs and customs formalities.

They do not replace the sales contract, contract of carriage or insurance policy. Nor do they determine title to the goods, payment terms, remedies for breach, force majeure or governing law.

Four questions must therefore be kept separate:

1. Where are the goods delivered?

1. When does risk transfer from seller to buyer?

1. Who arranges and pays for carriage?

1. Who arranges insurance, and on what terms?

Confusing them may leave one party bearing risk without the protection it expected.

The key point: only CIF and CIP require insurance

According to the ICC, CIF and CIP are the only Incoterms® 2020 rules requiring the seller to obtain insurance:

• CIF (Cost, Insurance and Freight): for sea or inland waterway transport. The default is Institute Cargo Clauses (C) or similar cover, unless the parties agree a higher level.

• CIP (Carriage and Insurance Paid To): for any mode, including multimodal transport. The default is Institute Cargo Clauses (A) or similar cover, unless otherwise agreed.

Paying for insurance does not mean that the seller retains risk until destination. In both cases the insurance must enable the buyer, or another party with an insurable interest, to claim because risk transfers before the main carriage ends.

The other nine rules impose no insurance duty. This does not make insurance unnecessary: the party bearing the risk should consider cover suited to the cargo, route and contract.

Practical table: risk, carriage and insurance under all 11 rules

This table summarises the operational logic of Incoterms® 2020. It is not a reproduction of the official rules and cannot replace them; the exact named place or port and the contract terms matter.

Rule	General risk-transfer point	Main carriage	Insurance required by the rule?
EXW	Goods placed at buyer’s disposal at the named place, not loaded	Buyer	No
FCA	Delivery to the carrier or person nominated by buyer at the named place	Buyer	No
FAS	Goods placed alongside the vessel at the port of shipment	Buyer	No
FOB	Goods loaded on board at the port of shipment	Buyer	No
CPT	Delivery to the carrier contracted by seller	Seller pays to named destination	No
CIP	Delivery to the carrier contracted by seller	Seller pays to named destination	Yes, seller: ICC A or similar by default*
CFR	Goods loaded on board at the port of shipment	Seller pays to destination port	No
CIF	Goods loaded on board at the port of shipment	Seller pays to destination port	Yes, seller: ICC C or similar by default*
DAP	Goods at buyer’s disposal at destination, ready for unloading	Seller	No
DPU	Goods unloaded and at buyer’s disposal at destination	Seller	No
DDP	Goods at buyer’s disposal at destination, import cleared and ready for unloading	Seller	No

\* The parties may agree a different level. Policy terms, exclusions, limits, deductibles, duration and insurable interest must always be checked.

The “C” rule trap: paying to destination is not bearing risk to destination

CPT, CIP, CFR and CIF are followed by a destination, yet they are shipment rules. The seller pays the main carriage to the named destination, while delivery and risk transfer take place at origin.

Under CPT and CIP, risk passes when the seller delivers the goods to the carrier at the agreed point. Where several carriers are involved, the place of the first handover should be stated precisely.

Under CFR and CIF, risk passes when the goods are loaded on board at the port of shipment. These rules are for port-to-port sea or inland waterway transport, not the natural choice for a container delivered earlier to a terminal.

The ICC’s official selection guide points towards FCA, CPT or CIP for containerised or multimodal cargo, depending on who arranges carriage and whether the seller is to include insurance.

CIF and CIP: an insurance duty with different default levels

Both require the seller to arrange and pay for insurance to the stated destination, but the required scope differs.

CIF: minimum cover may not match the exposure

CIF defaults to Institute Cargo Clauses (C) or similar cover. This named-perils basis focuses on major transport accidents. It may comply with the contract yet be narrow for theft, handling damage, wetting or other losses not caused by an insured peril.

CIP: broader cover, not unlimited cover

CIP defaults to Institute Cargo Clauses (A) or similar cover. It is broader, but exclusions remain and extensions may be needed for war, strikes, temperature, rejection, cyber risks or specialist cargo.

Our guide to [ICC A, B and C](/post/icc-a-b-c-seguro-transporte-mercancias) examines the clauses in detail. Before relying on a certificate, check the clause edition, sum insured, journey, insured party, beneficiary and endorsements.

Two examples: who needs protection?

CIP Madrid–Lyon for machinery

A Spanish seller agrees `CIP Lyon, buyer’s warehouse, Incoterms® 2020`. The machine is handed to the first carrier in Madrid. Risk transfers to the buyer then, although the seller pays carriage and insurance to Lyon.

The contract should identify the exact delivery point, require cover suited to the machine’s value and sensitivity, and address loading, transhipment, unloading, storage and handling.

CIF Valencia–Casablanca for bulk cargo

The seller arranges sea carriage and insurance to Casablanca. Risk nevertheless passes to the buyer when the goods are loaded on board in Valencia. The default CIF insurance may be ICC C or similar.

If the buyer needs broader protection, it should be agreed in advance. A certificate may meet the contractual minimum without covering the actual cause of loss.

Why FOB and CIF often fit containers poorly

For containerised cargo, the seller normally hands the unit to a terminal before it is loaded on board. Under FOB or CIF, risk does not transfer until loading. The seller may therefore lose physical control while still bearing the risk.

FCA, CPT or CIP can place delivery at the terminal or actual carrier handover. The choice depends on who controls carriage and whether the seller must provide insurance. Documentary-credit requirements should also be coordinated.

Incoterms®, insurable interest and policy duration are different

Contractual risk helps identify who may suffer the loss, but indemnity depends on an insurable interest and a casualty within the policy period and scope.

Spain’s Law 14/2014 on Maritime Navigation permits legitimate property interests exposed to maritime risks to be insured. It also governs cargo insurance and the extension of “warehouse-to-warehouse” wording between the places defined in the policy.

Warehouse-to-warehouse cover is not unlimited in time or geography. Diversions, elected storage, changes of destination, delay and termination of transit may trigger specific provisions.

What to state in the contract and insurance

Document at least:

• the rule, precise place or port, and edition—for example, `FCA Terminal X, Valencia, Incoterms® 2020`;

• the exact delivery point where several carriers may be involved;

• who arranges carriage and any carrier requirements;

• who arranges insurance, even where the rule imposes no duty;

• applicable Institute Cargo Clauses, edition and extensions;

• sum insured, currency, deductible and limits per shipment, package or accumulation;

• full route, transhipments, storage and transport modes;

• cargo, packaging, temperature and specialist conditions;

• insured party, beneficiary and claim document;

• notice procedure and preservation of rights against third parties.

Frequently asked questions

Which Incoterms® rule requires the buyer to arrange insurance?

None expressly does. However, the buyer bears risk from origin under several rules and should consider its own cover where the seller has no duty to provide it.

Under CIF, is cargo insured until arrival?

The seller must arrange insurance to the destination port, but risk passes when the goods are loaded on board at origin. The policy responds only where the loss falls within its period, insured perils and terms.

Does CIP always mean “all risks”?

No. It defaults to ICC A or similar, a broad basis subject to exclusions, limits, deductibles and specialist conditions.

For a container, is FOB or FCA better?

FCA usually reflects the actual handover to the carrier or terminal more accurately. The transaction, carriage control, documents and exact delivery point must still be reviewed.

Do Incoterms® rules decide ownership?

No. Title depends on the contract and applicable law and should not be confused with transfer of risk.

Does carrier liability remove the need for cargo insurance?

No. Liability may depend on the cause, be limited by law or contract, or fall short of the cargo value. Cargo insurance protects a different interest under its own terms.

How Nautilux can help

Choosing an Incoterms® rule without coordinating insurance may create a protection gap, duplicate cost or leave the buyer with minimum cover. Nautilux Marine Broker reviews the cargo, risk-transfer point, route, values and required clauses before approaching the market.

Explore our marine cargo insurance or request a review of your import or export transaction.

*General information reviewed on 4 August 2026. It is not legal advice and does not confirm cover. The sales contract, official Incoterms® 2020 rule, policy, facts and applicable law must be reviewed.*