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Formulas Used To Calculate The Insurance Premium & Coverage Amount When Insuring Exports At 110 % Of CIF Or CIP Value
|
P= |
(C + F)1.1R |
A= |
1.1(C + F) |
|
1-(1.1R) |
1-1.1R |
Wherein:
|
P=Insurance Premium |
F=Freight |
A=Coverage Amount |
|
C=Cost |
R=Insurance Rate |
|
EXAMPLE A: Calculation of the insurance premium.
Known factors: Cost is $17,050. Freight is 2,500. The insurance rate is 0.55%.
|
P= |
(C + F)1.1R |
|
1-(1.1R) |
|
P= |
(17,050 + 2,500)1.1(0.0055) |
|
1-(1.1 x 0.0055) |
|
P= |
(19,500)(0.00605) |
|
0.99395 |
|
P= |
118.2775 |
|
0.99395 |
P=118.9974; Rounded up, the insurance premium is $119.00
OPTIONAL STEP: To calculate the coverage amount (110 percent of the CIF/CIP value) simply continue with the following steps:
- Determine CIF/CIP value by adding Cost, Freight, and the Insurance Premium.
Cost & Freight
$19,550.00
Insurance
$119.00
Total:
$19,669.00
- Calculate the coverage amount by multiplying the CIF value by 110 percent.
1.1 x $19.669.00 =
$21,635.90
EXAMPLE B: Calculation of the coverage amount, without the insurance premium value.
Known factors: Cost is $17,050. Freight is 2,500. The insurance rate is 0.55 percent.
|
A= |
1.1R(C + F) |
|
1-(1.1R) |
|
A= |
1.1(17,050 + 2,500) |
|
1-(1.1*0.0055) |
|
A= |
1.1*19,500 |
|
1-0.00605 |
|
A= |
21,505 |
|
0.99395 |
A=21,635.8971; Rounded up, the coverage amount is $21,635.90
Hint: Use the second equation to check the accuracy of the calculations done using the first equation.
