Carriage and Insurance Paid (CIP) and Carriage Paid To (CPT)
When it comes to international shipping, understanding Incoterms is not optional — it’s essential. Two of the most commonly confused terms are Carriage and Insurance Paid To (CIP) and Carriage Paid To (CPT).
While they may look almost identical on paper, the differences between CIP and CPT could determine who bears the risk, who pays for insurance, and how much protection your goods have during transit.
Whether you’re a freight forwarder, importer, exporter, or logistics manager, this 2025 guide will help you navigate these terms with confidence.
What Are Incoterms and Why Do They Matter?
Incoterms, short for International Commercial Terms, are standardised trade terms created by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in cross-border trade — including cost allocation, risk transfer, and insurance requirements.
CIP and CPT fall under the Incoterms 2020 rules, which remain the latest version in use as of 2025.
Understanding CIP (Carriage and Insurance Paid To)
Carriage and Insurance Paid To (CIP) means the seller:
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Pays for carriage (transport) to the agreed destination.
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Pays for insurance coverage to protect goods during transit.
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Must provide coverage at least equal to Clause A (All Risks) under the Institute Cargo Clauses — unless the contract states otherwise.
Risk Transfer in CIP
The risk passes from the seller to the buyer once the goods are handed over to the first carrier, not when they arrive at the destination. This means that even though the seller is paying for insurance and transport, the buyer technically bears the risk after handover.
When to Use CIP
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High-value goods that require maximum insurance coverage.
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When the buyer wants the seller to handle insurance arrangements.
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For sensitive cargo like electronics, pharmaceuticals, or machinery.
Read Also: Everything To Know About Exworks
Understanding CPT (Carriage Paid To)
Carriage Paid To (CPT) is similar to CIP, but without the insurance obligation.
Under CPT, the seller:
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Pays for carriage to the agreed destination.
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Is not required to arrange or pay for insurance.
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Transfers risk to the buyer at the first carrier handover point.
Risk Transfer in CPT
Just like CIP, risk passes at the point of carrier handover. However, since the seller is not paying for insurance, the buyer must arrange their coverage if they want protection.
When to Use CPT
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Lower-value shipments.
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When the buyer already has a preferred insurance provider.
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For bulk shipments where the cost of seller-arranged insurance may not be competitive.
CIP vs CPT: Side-by-Side Comparison
| Feature | CIP | CPT |
|---|---|---|
| Transport Costs | Paid by the seller | Paid by the seller |
| Insurance Costs | Paid by seller (Clause A minimum) | Paid by the buyer |
| Risk Transfer Point | When goods are handed to the first carrier | When goods are handed to the first carrier |
| Best For | High-value cargo, sensitive goods | Bulk cargo, low-value shipments |
| Insurance Level | Must meet Incoterms 2020 Clause A minimum | None required |
Real-World Example
Let’s say Bowagate Global Ltd is shipping 10,000 units of high-value electronics from Shenzhen, China, to Lagos, Nigeria.
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If the agreement is CIP Lagos, Bowagate pays for freight and full insurance up to Lagos, but risk still passes to the buyer once goods are handed to the carrier in China.
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If the agreement is CPT Lagos, Bowagate only pays for freight; the buyer must arrange insurance if they want coverage.
How CIP and CPT Affect Freight Forwarders and Shippers
For freight forwarders, understanding this distinction is crucial for:
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Quoting shipping rates accurately — knowing who pays for insurance prevents billing disputes.
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Managing claims — in CIP, the seller can initiate claims; in CPT, the buyer handles it.
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Reducing liability — knowing when risk transfers protects against unexpected losses.
For a deeper understanding of all Incoterms and their legal implications, you can refer to the ICC Incoterms 2020 official rules.
Choosing Between CIP and CPT in 2025
Factors to consider when deciding:
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Value of goods – High-value cargo is better protected under CIP.
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Buyer’s insurance network – If the buyer has cheaper or better coverage, CPT may be ideal.
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Market volatility – In unstable markets or routes with high risk, CIP provides extra peace of mind.
Final Thoughts
The difference between CIP and CPT is not just about insurance — it’s about risk allocation, cost control, and operational efficiency. Freight forwarders, exporters, and importers must understand these distinctions to avoid costly mistakes in 2025.
If you’re unsure which Incoterm best suits your shipment, speak to an experienced freight forwarder who can tailor solutions to your cargo, route, and budget.
🚢 Need help arranging CIP or CPT shipments?
At Bowagate Global Ltd, we specialize in sea freight, air freight, customs clearance, warehousing, and global shipping solutions. Our experts ensure your cargo moves smoothly, safely, and cost-effectively.
📞 +234 818 607 8330
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