110% CIF Means That I Will Do An Insurance Of The Insurance

[avibabo]

Hello,

I am pretty new to the international trade insurance questions, so I would be really thankful for your input.

My clients requires to have 110% CIF insurance. However, after talking with my insurer he says that if we do 110% CIF it means that I will do an insurance of the insurance. If I understand correctly 110% CIF = (goods + insurance of goods + freight)*110%, which sounds a bit absurdly . So, he proposes to take an insurance of the value of CFR (goods+ freight) *110%.
To me the option that he proposes sounds more logical. What I cannot understand is what is the point of doing 110% CIF, which basically means to insure the insurance of goods?

Thanks a lot in advance!!!

[picant]

Hi Pal,

normally insurance does not cover an extra value, but in this case you are insuring the value of the goods at destination, including a so called expected profit for 10%. The insurance company must have such expertise to deal with this situation.
Other comments appreciated
Ciao

[billgoughSMICE]

In my experience basic insurance covers the value of goods only then the extra 10% is designed to cover all other costs paid by the buyer in getting the goods to their delivery point. These costs include freight charges, intermediary compensation and other such items including the cost of the insurance, this is nothing new. This 110% class "C" insurance is an industry standard.

In fact, this is why many buyer's will only consider CIF when they know an intermediary is involved, it limits the amount of compensation such intermediary can legally charge as the total invoice, including all debits and credits, must equal no more than 110% of the value of the goods. My organization has asked for and had supplier's obtain and issue Class "C" insurance valued as high as 115% to overcome this problem.

[hardy2175]

Logically insurance should be on the FOB value of the goods and the extra 10 percent covering other charges .
Normally the insurance cost are only 1% of the cost of goods so whether it is on CFR or CIF doesnt make much of a difference.

[GUBAZ]

UCP 600 article 28 describe as below.

If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods.

When the CIF or. CIP value cannot be determined from the documents, the amount of insurance coverage must be calculated on the basis of the amount for which honour or negotiation is requested or the gross value of the goods as . shown on the invoice, whichever is greater.