The calculation of cargo insurance policies is done using a standardized technique known as the CIF+10% formula. The calculation involves considering three different values, which are the Commercial Invoice
Value (C), insurance premium (I), and freight and associated charges (F).
The CIF value of a shipment is calculated by adding the three different values of C, I, and F. The 10% added to the total cost is due to inflation in freight charges. For instance, if the Commercial Invoice Value is $60,000, the insurance cost is $300, and the shipping charge is $1,000, then the CIF value of the shipment is $61,300.
The final step in calculating the total insurance payable is to identify the percentage granted by the insurance company. Based on this percentage, the rate is determined, and the total insurance payable is calculated. While this is a commonly used method, insurance companies might update or change this depending on the industry trends, etc.