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How to calculate CIF insurance premium in international

by:VIPUTRANS     2020-05-24
In international trade terms, CIF means cost, insurance and freight. The CIF trade term refers to the seller completing the delivery when the goods cross the ship's rail at the port of shipment, and in actual operation, the seller obtains a clean and loaded bill of lading as the risk transfer boundary. The seller must pay the freight and expenses required to ship the goods to the designated port of destination, but the risk of loss or damage of the goods after delivery and any additional costs due to various events are transferred from the seller to the buyer. CIF trade terms In international trade terms, CIF means cost, insurance and freight. The CIF trade term refers to the seller completing the delivery when the goods cross the ship's rail at the port of shipment, and in actual operation, the seller obtains a clean and loaded bill of lading as the risk transfer boundary. The seller must pay the freight and expenses required to ship the goods to the designated port of destination, but the risk of loss or damage of the goods after delivery and any additional costs due to various events are transferred from the seller to the buyer. However, under CIF conditions, the seller must also apply for marine insurance against the risk of the buyer ’s goods being lost or damaged in transit. Therefore, the seller concludes an insurance contract and pays the insurance premium. The buyer should note that the CIF term only requires the seller to insure the minimum insurance coverage. If the buyer needs a higher level of insurance coverage, he or she needs to reach a clear agreement with the seller or make additional insurance arrangements on his own. How to calculate CIF premiums 1. If there are no special regulations, marine insurance premiums are insured at 110%. 2. If the policy is stated on the letter of credit issued by the customer, the policy will not be used as a letter of credit to pay the document, and you can consult the customer on the contract amount or the invoice amount on the letter of credit. 3. If other documents are involved, such as a certificate of origin, and if the amount is displayed, then the documents must be consistent. 4. If the amount shown on the certificate of origin is 90% of the contract amount, even if the policy is 100% of the contract amount, then the claim can only be settled at 90% of the contract amount. example: The CIF price of the product 03001 is USD8937.6. The importer requires that all risks (insurance premium rate 0.8%) and war insurance (insurance premium rate 0.08%) be insured at 110% of the transaction price. Try to calculate the insurance payable by the exporter to the insurance company cost? solution: Insurance amount = 8937.6 × 110% = 9831.36 USD Insurance premium = 9831.36 × (0.8% + 0.08%) = 86.52 USD Check the exchange rate of RMB to US dollar is 8.25 to 1, the conversion of RMB = 86.52 × 8.25 = 713.79 yuan (PS: In China's export business, CFR and CIF are two commonly used terms. Given that insurance premiums are calculated based on the insurance amount based on the CIF price, the two terms prices should be converted as follows.) Converted from CIF to CFR price: CFR = CIF × [1- (1 + insurance premium rate) × insurance premium rate] Convert from CFR to CIF price: CIF = CFR ÷ [1- (1 + insurance premium rate) × insurance premium rate]
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