8.4.2 Calculating Insured Amount and Premium 计算投保金...

8.4.2 Calculating Insured Amount and Premium 计算投保金额和保费

We have discussed this issue in Chapter 5(5.3.4.2 Insurance保险).It may help to review it here,but with a different way of calculation.The insured amount is the amount at which the insured cargo is valued,which must be at least the invoice value of the cargo.Under a CIF contract,it is common practice for you to insure the cargo for 10%above the invoice value,an amount considering the cost,the insurance premium,the ocean freight and the expected profit that would otherwise be achieved.The insurance clauses should be expressly stipulated in a sales contract,including the insurer,the insured,the insurance clauses selected,the insured amount,etc.Notably,according to Incoterms 2020,CIP now requires an insurance at least with the minimum cover of the Institute Cargo Clause(A)(All Risks,subject to itemized exclusions),instead of the Institute Cargo Clause(C)(Number of listed risks,subject to itemized exclusions)under Incoterms 2010.

According to Incoterms 2020 and UCP 600,the insured amount is calculated based on the CIF or CIP value as follows:

Insured amount = CIF or CIP value×(1+markup rate)

insurance premium = insured amount × premium rate

If you are purchasing insurance on behalf of the importer under a CFR or an FOB-based contract,you need to convert the price into a CIF price before you can calculate the insured amount.The formulas for the conversions are as follows:

CIF = CFR/[1-premium rate×(1+markup rate)]

∵CFR = CIF- insurance premium

= CIF-CIF×(1+markup rate)×premium rate

= CIF×[1-premium rate×(1+markup rate)]

∴CIF = CFR/[1-premium×(1+markup rate)]

or,

CIF =(FOB+ sea freight)/[1-premium rate×(1+markup rate)]

With the conversion complete,you will be able to calculate both the insured amount and the insurance premium.The premium rate charged by the insurance company is a function of the goods,packaging,quantity,mode of transport,the carrying vessel,transit time,scope of coverage,past experience,etc.For specific premium rate,consult the insurance company.In practice,the insurance company normally charges a flat fee for cargoes under a certain value for simplicity.