Who has the insurable interest under CIF?

The buyer, from the moment the goods are on board — that is where risk passes. The seller buys the policy, and the certificate is endorsed so that the right to claim travels with the documents to the party actually bearing the risk.

Can I insure goods I do not own yet?

Yes. Marine insurance does not require the interest to exist when the cover is taken out — section 6 of the Marine Insurance Act 1906 allows it to attach later, and Clause 11.1 of the Institute Cargo Clauses requires the interest at the time of the loss. That is what makes open covers and "lost or not lost" cover workable.

What is the 110% for?

It is the conventional allowance for the costs a loss creates beyond the goods themselves. Both Incoterms 2020, for CIF and CIP, and UCP 600 Article 28, for documents under a letter of credit, require at least 110% of the CIF or CIP value.

What happens if I declare less than the goods are worth?

A partial loss is reduced in the same proportion. Declare 60% of the value and a partial loss pays 60% of what it otherwise would. A total loss simply pays the sum insured, which is already less than you lost.

Who may claim, and for how much

Two questions decide whether a cargo policy pays: did the claimant stand to lose something when the loss happened, and was the value declared honestly. Both have precise answers in the statute and in the clauses.

MIA 1906 ss.5–6Clause 11CIF plus 10%

The interest

Section 5 of the Marine Insurance Act 1906: a person has an insurable interest where they stand in a legal or equitable relation to the adventure or to insurable property at risk, such that they may benefit by its safety or be prejudiced by its loss.

Clause 11.1 of the Institute Cargo Clauses puts the timing beyond doubt: to recover, the insured must have an insurable interest at the time of the loss. Clause 11.2 then allows recovery for a loss that happened before the contract of insurance was concluded, unless the insured knew about it and the insurer did not.

Why it is unusual here

In most classes of insurance the interest must exist when the contract is made. Marine insurance is different: section 6 allows it to attach later. Without that, an open cover over goods not yet bought, and a certificate endorsed onward to a buyer who did not exist at inception, would both be impossible.

It is also why the certificate is made assignable. The cover was arranged by one party and the loss is suffered by another, and the endorsement puts the claim in the right hands.

Assignment and blank endorsement →

How the sum insured is built

Cargo is written on an agreed-value basis, so the figure on the certificate is what is paid for a total loss. It is built up rather than guessed.

Component	Included	Why
Commercial invoice value	Always	The cost of the goods as invoiced. Under a letter of credit it is also the figure the bank works from.
Freight	Where paid or payable	Freight is lost with the goods when it is payable regardless of arrival, which is the usual position.
Insurance premium	Usually	Part of the cost of landing the goods, and part of what is lost when they do not land.
Duty and clearance costs	Where already paid	Under DDP, and on any shipment lost after clearance, the duty has gone too. Left out of the sum insured, it is not recovered.
Uplift, customarily 10%	Conventional	An allowance for the incidental costs of a loss — surveying, disposal, the margin and the expense of replacing the shipment.

Work out a sum insured

Under-insurance: the trade that never pays

Where the sum insured is less than the true value, the insured is treated as their own insurer for the shortfall and a partial loss is cut in the same proportion. The premium saved is a fraction of a percent of the value; the shortfall on a claim is a proportion of the whole loss.

Common questions

Who has the insurable interest under CIF?: The buyer, from the moment the goods are on board — that is where risk passes. The seller buys the policy, and the certificate is endorsed so that the right to claim travels with the documents to the party actually bearing the risk.
Can I insure goods I do not own yet?: Yes. Marine insurance does not require the interest to exist when the cover is taken out — section 6 of the Marine Insurance Act 1906 allows it to attach later, and Clause 11.1 of the Institute Cargo Clauses requires the interest at the time of the loss. That is what makes open covers and "lost or not lost" cover workable.
What is the 110% for?: It is the conventional allowance for the costs a loss creates beyond the goods themselves. Both Incoterms 2020, for CIF and CIP, and UCP 600 Article 28, for documents under a letter of credit, require at least 110% of the CIF or CIP value.
What happens if I declare less than the goods are worth?: A partial loss is reduced in the same proportion. Declare 60% of the value and a partial loss pays 60% of what it otherwise would. A total loss simply pays the sum insured, which is already less than you lost.

Sources

This page summarises the instruments above. It is not the wording, and it is not legal advice. Where a summary conflicts with a convention text, a policy wording or a certificate, that document governs.

InsuranceScanner is an insurance intermediary, not an insurer — see the Terms for our role. Nothing here is a personal recommendation that a particular cover, sum insured or deductible is suitable for you. Where anything on this page conflicts with the certificate, policy schedule or wording issued by an insurer, that document governs.