Premium

Insurance premium in foreign trade specifically refers to the fee paid by the insured to the insurance company for purchasing cargo transportation insurance. It is one of the core cost components of trade terms such as CIF (Cost, Insurance and Freight). Its calculation is usually based on the insured amount (CIF value plus 10%) and the insurance rate (determined by cargo type, shipping route, coverage, etc.). The formula is: Insurance Premium = Insured Amount × Insurance Rate. Usage scenarios include: exporters need to calculate the insurance premium when quoting under CIF/CIP terms; importers need to pay the insurance premium when arranging insurance themselves; buyers and sellers agree on who bears the insurance premium. Notes: Insurance premium is different from freight; the former is consideration for risk transfer, while the latter is consideration for transportation services. Under FOB/CFR terms, the insurance premium is borne by the buyer, and the seller has no obligation to insure. When insuring, the coverage (such as All Risks, With Particular Average) and the percentage of markup should be clearly specified to avoid under-insurance or over-insurance. It is often used interchangeably with 'premium', but 'insurance premium' is more commonly used in formal foreign trade documents.