Extent of insurance required

Insurance requirements will depend upon the terms of sale, that is the conditions agreed under which purchases and or sales will depend.

The International Chamber of Commerce (ICC) has devised and published standard trade definitions for international sales contracts, known as Incoterms, which stands simply for "International Commercial Terms".

Use of these terms should make international trade easier and usually helps traders in different countries understand one another, in addition to providing the legal certainty upon which mutual confidence between business partners must be based.

Among the best known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To).

See also our pages on insurance cover available and types of policy available.

A brief resume of the sellers and buyers responsibilities is as follows:

Sellers Responsibility	Terms of Sale	Buyers Responsibility
Insurance not required. Sellers Interest cover may be possible.	EXW (Ex Works)	Insurance normally required from sellers warehouse to final destination.
Responsible for insurance from warehouse to delivery on board the vessel or aircraft. Sellers Interest cover may be possible.	FOB (Free on Board) CFR (Cost & Freight)	Responsible for insurance from time delivered on board the vessel or aircraft to final destination.
Responsible for insurance from warehouse to delivery buyers warehouse or other placed nominated by the buyer.	CIF (Cost, Insurance & Freight)	Insurance not normally required. Buyers Interest OR Difference in Conditions cover may be possible.
No obligation for the seller to arrange insurance but prudent to arrange from warehouse to delivery at the agreed point at named place of destination.	DDU (Delivered Duty Unpaid)	Insurance normally required from delivery at the agreed point at named place of destination to buyers warehouse if relevant if not at named place of destination.
No obligation for the seller to arrange Insurance. Sellers Interest cover may be possible.	CPT (Carriage Paid To)	Insurance normally required from sellers warehouse to final destination.
Responsible for insurance from warehouse to delivery buyers warehouse or other placed nominated by the buyer.	CIP (Carriage & Insurance Paid To)	Insurance not normally required. Buyers Interest cover may be possible.