Insurance Markup

Insurance Markup is a common practice in international trade cargo transportation insurance, where the insured determines the insured amount by adding a certain percentage to the invoice value (CIF price). The markup rate is typically 10%, i.e., Insured Amount = Invoice Value × 110%. Its purpose is to enable the insured, in the event of total or partial loss of goods, to recover not only the cost of goods but also expected profits, import duties, bank charges, and other miscellaneous expenses. Usage scenarios include letters of credit requiring insurance at 110% of invoice value, or both parties agreeing on a markup rate in the contract. Precautions: A higher markup rate is not always better; insurance companies may charge additional premiums or even refuse coverage for excessively high markups. If the letter of credit does not specify a markup rate, the customary rate is 10%, but it should not be confused with 'Insured Amount'—the insured amount is the actual insured value after markup, while insurance markup is the percentage used to calculate the insured amount. Unlike 'Insured Value,' which is the actual value of the goods, insurance markup is the additional profit portion insured on top of it. Foreign trade practitioners must clearly specify the markup rate in contracts and letters of credit to prevent document discrepancies.