How it is calculated
- Insurance premium = CIF × insured value (%) × insurance rate (%)
- CIF = FOB + sea freight + other seller costs + insurance premium
- CIF = (FOB + freight + other costs) ÷ (1 − insured value × insurance rate), because the premium is charged on the CIF value
- FOB = CIF − sea freight − other seller costs − insurance premium
- For CFR, set the insurance rate to zero
Worked example
FOB $170.00 per tonne, sea freight $35.00 per tonne, no other costs, insurance at 0.15% on an insured value of 110% of CIF. CIF = (170 + 35) ÷ (1 − 1.10 × 0.0015) = $205.34. The insurance premium is 205.34 × 1.10 × 0.0015 = $0.34, so 170 + 35 + 0.34 = $205.34. Going back, FOB = 205.34 − 35 − 0.34 = $170.00. Adding $2.50 per tonne of other seller costs raises the CIF price to $207.84. The rates are illustrations, not quotes. Use current freight and insurance quotes.
Frequently asked questions
How do I estimate a CIF price from a FOB price?
Add the sea freight, any other costs the seller carries to the destination port, and the insurance premium. Because the premium is charged on the CIF value, the calculator solves for it directly.
What costs are included in a CIF price?
The FOB price, which covers export clearance and loading on board, plus sea freight to the destination port and minimum marine insurance. Unloading and import duties are normally for the buyer. See the FOB vs CIF article for the full list.
How do I convert a CIF price to FOB?
Subtract the sea freight, any other seller costs and the insurance premium from the CIF price.
Why is insurance calculated on 110% of the CIF value?
Commonly quoted CIF practice insures 110% of the contract value, with minimum cover on the Institute Cargo Clauses (C). You can change the insured value in the calculator.
How do I use this for CFR?
Set the insurance rate to zero. CFR includes freight but not insurance, so FOB equals CFR minus freight.
Does this include port costs or demurrage?
No. It only deducts the freight and insurance you enter. Add any other costs that are for the seller's account under the contract.