How do CPT and CIP differ regarding insurance obligations?

• A. CPT requires carriage to the named place but does not require insurance; CIP requires the seller to procure minimum insurance coverage for the goods.
• B. CPT requires the seller to insure; CIP requires no insurance.
• C. Both CPT and CIP require full insurance to destination.
• D. Neither CPT nor CIP require any insurance.

Answer: (A)

The difference hinges on insurance obligations. In CPT (Carriage Paid To), the seller pays for the carriage to the named destination, but there is no requirement for the seller to arrange insurance for the goods. The risk transfers to the buyer when the goods are handed to the first carrier, so the buyer bears that risk even though the seller has paid for transport.

In CIP (Carriage and Insurance Paid To), the seller must arrange insurance for the goods in transit to the named destination, providing at least a minimum level of coverage. The risk still passes to the buyer when the goods are handed to the carrier, but the insurance is in place to protect against loss or damage during the journey.

That explains why the statement is correct: CPT does not require insurance, while CIP requires the seller to procure minimum insurance coverage.