# Insurance in Landed Cost: CIF vs FOB and the Duty You Owe

Source: https://landedcosthq.com/blog/2026-11-06-insurance-landed-cost-cif-fob/

Cross-border operations guide · November 6, 2026


**Short answer:** Under CIF the seller pays freight and insurance to the destination port, but the risk passes to you the moment the goods go on board at origin. Under FOB you arrange and pay freight and insurance yourself, and the risk passes at the same point. CIF moves cost, not risk.

## Cost moves, risk does not

Both FOB and CIF are Incoterms 2020 rules published by the International Chamber of Commerce, and the cost split is the main difference. Under FOB, the seller handles packing, inland transport to the port, export customs clearance, and loading, and the responsibility ends once the goods are loaded onto the vessel at the named port of shipment. From that point, all cost and risk passes to the buyer: ocean freight, cargo insurance, import customs clearance, and duties.

Under CIF, the seller pays for ocean freight and arranges minimum cargo insurance to the named destination port. But despite covering freight and insurance costs to the destination, risk still transfers to the buyer at the same point as FOB, when the goods are loaded onto the vessel at the port of shipment. The seller pays freight and insurance all the way to the destination port, but the buyer bears the risk of loss during the ocean crossing. A CIF buyer whose container is damaged in transit claims on the insurance policy, not against the seller.

That is the counter-intuitive point about CIF, and it is the one that costs buyers money. CIF moves cost, not risk. The risk row in the responsibility matrix is identical for both terms, and the duties row is identical too: import customs clearance and duties are the buyer's responsibility under both. What changes is who books the freight and who buys the insurance, and the quality of that insurance.

## The insurance gap

Under CIF the seller must insure the goods for the buyer, but Incoterms 2020 sets that cover at the minimum. The seller insures at least 110 percent of the contract value under Institute Cargo Clauses (C), unless the parties agree otherwise. Clauses (C) is a named-perils policy: it covers events such as fire, sinking, and collision, not all loss. For most cargo, the realistic losses are leaking containers, contamination, temperature damage, theft, and rough handling, and those sit outside the narrow cover.

Under FOB, the buyer arranges their own policy and can choose Institute Cargo Clauses (A), the most comprehensive coverage available, which covers all risks except those specifically excluded. If you buy CIF, ask the supplier to quote Clauses (A), or top up the cover yourself. If you buy FOB, your own policy or your forwarder's open cover applies from loading, and you control the terms.

The price comparison has to include this. A CIF quote that looks $440 cheaper than the FOB route can carry thinner insurance, and the difference shows up the first time a container is damaged. In one worked example, a supplier price of $20,000 FOB against $22,300 CIF left the CIF route $440 more expensive once proper Clauses (A) insurance was added to the FOB side, and the CIF side still carried only Clauses (C). The CIF quote costs more and covers less, which is the opposite of what the term promises.

## The duty difference, and the landed cost math

The United States calculates import duties on FOB value, meaning the value of goods at the port of origin, excluding international freight and insurance, under 19 CFR 152.103. Most other major importing countries, including the UK and all EU member states, calculate duties on CIF value, which includes freight and insurance. The US is the primary country using FOB for customs valuation, and CIF results in higher duty in those countries because the customs value includes the freight. The term you choose changes the dutiable value in Europe and does not change it in the United States.

Landed cost is everything paid until the goods are in the warehouse: product price, inland transport and export clearance, ocean or air freight, cargo insurance, destination port and terminal charges, customs duty and import tax, and inland delivery. Only freight and insurance change hands between FOB and CIF. Everything after the destination port is the buyer's either way, including destination THC, delivery order fees, customs clearance, duties, and last-mile trucking. A CIF quote that says all in without naming DAP or DDP is not all in.

FOB gives control of freight, insurance, and the carrier, and usually the lower total if the buyer has a reliable forwarder. CIF is simpler when the buyer does not, but the buyer pays for freight they cannot see and gets only minimum insurance. For most buyers comparing the two, FOB is the better default, and CIF is the right choice for a small trial order where the simplicity is worth the premium. Either way, read the insurance clause before signing, because the term that sounds like it covers everything covers the least.

Keep reading: [Currency conversion at entry: CBP uses its own rate, not your bank's](https://landedcosthq.com/blog/2026-11-06-currency-conversion-entry-date-rate/index.md), [Freight allocation: weight, value, or units, pick one and defend it](https://landedcosthq.com/blog/2026-11-06-freight-allocation-methods-landed-cost/index.md).

## Frequently asked questions

## What do FOB and CIF actually mean?

FOB, Free On Board, means the seller's responsibility ends once the goods are loaded onto the vessel at the named port of shipment. CIF, Cost, Insurance and Freight, means the seller also pays ocean freight and arranges minimum cargo insurance to the named port of destination. Both are Incoterms 2020 rules published by the International Chamber of Commerce, and both apply only to sea and inland waterway transport.

## What does the CIF minimum insurance actually cover?

Institute Cargo Clauses (C) is the minimum cover required under Incoterms 2020, and the seller insures at least 110 percent of the contract value under it. Clauses (C) is a named-perils policy covering fire, sinking, and collision, not all loss. The realistic losses for most cargo, leaking drums, contamination, temperature damage, theft, and rough handling, sit outside that narrow cover.

## Can I get better insurance than the CIF minimum?

Yes, and it is usually the right call. Under FOB the buyer arranges their own policy and can choose Institute Cargo Clauses (A), the most comprehensive coverage available, which covers all risks except those specifically excluded. The CIF buyer's options are to ask the supplier to quote Clauses (A) or to top up the cover themselves.

## Does FOB or CIF change the duty I pay?

The United States calculates import duties on FOB value, the value of goods at the port of origin, excluding international freight and insurance, under 19 CFR 152.103. Most other major importing countries, including the UK and all EU member states, calculate duties on CIF value, which includes freight and insurance. The US is the primary country using FOB for customs valuation, and CIF results in higher duty because the customs value includes the freight.