CIF vs FOB: Insurance and Risk
Compare CIF (Cost, Insurance, Freight) and FOB (Free on Board) Incoterms: who bears risk, insurance obligations, and cost implications.
Incoterms Overview
CIF (Cost, Insurance, Freight)
Seller pays for goods, insurance, and freight to destination port. Risk transfers when goods are on board at origin. Seller must arrange minimum insurance.
Pros
- ✓Seller handles logistics
- ✓Built-in insurance coverage
- ✓Simpler for buyers
- ✓Known total cost upfront
Cons
- ✗Higher quoted price
- ✗Seller controls insurance (may be minimal)
- ✗Less buyer control over shipping
- ✗Risk transfers at origin
Best for: Buyers new to importing, small shipments
Cost: Higher quoted price (includes insurance + freight)
Setup: Per shipment
FOB (Free on Board)
Seller delivers goods on board the vessel at origin port. Buyer arranges and pays for freight and insurance from that point. Risk transfers at origin.
Pros
- ✓Buyer controls shipping
- ✓Can negotiate better freight rates
- ✓Choose own insurance
- ✓Lower quoted price
Cons
- ✗Buyer arranges freight & insurance
- ✗More logistics work for buyer
- ✗Need freight forwarder
- ✗Multiple parties to coordinate
Best for: Experienced importers, large shipments
Cost: Lower quoted price + separate freight/insurance
Setup: Per shipment
FAQ
When does risk transfer in CIF vs FOB?+
In both CIF and FOB, risk transfers when goods are loaded on the vessel at the origin port. The key difference is who pays for freight and insurance: under CIF, the seller does; under FOB, the buyer does. Risk is the same—it's the cost allocation that differs.