# Insurance obligation

*Last updated: 2026-06-22*

> Protecting cargo against financial loss from damage, theft, or total loss is the core purpose of the insurance obligation – the legal or contractual requirement to insure goods in transit.

Protecting cargo against financial loss from damage, theft, or total loss is the core purpose of the insurance obligation – the legal or contractual requirement to insure goods in transit. Under Incoterms, the allocation of this duty is straightforward: CIF and CIP place it on the seller, while all other terms leave the buyer responsible for arranging adequate cover. Banks and issuing institutions routinely require proof of a valid policy before releasing letters of credit or trade finance facilities. The insurance certificate must correctly state cargo value, routing, and mode of transport; discrepancies can lead to proportional settlement when a claim is filed. The insurance obligation is distinct from carrier liability, which is capped under international conventions and does not extend to shipper negligence or force majeure events.

**Source:** [https://iccwbo.org/business-solutions/incoterms-rules/](https://iccwbo.org/business-solutions/incoterms-rules/)

## Quick Facts

| Property | Value |
|---|---|
| Term | Insurance obligation |
| Language | EN |
| Word count | 128 |
| Last updated | 2026-06-22 |
| Source | https://iccwbo.org/business-solutions/incoterms-rules/ |

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