The practice of insuring goods above their purchase price to cover the freight, duties and profit that their loss wipes out.
The insured value of goods in transit is not their purchase price: the loss also destroys freight already paid, customs duties, insurance costs and the profit the resale would have produced. International trade practice corrects that gap by a fixed uplift to the value, insured without the buyer having to prove the profit it would have made, which avoids opening an intractable accounting argument at every claim. The uplift dovetails with the incoterms, since it is the CIF or CIP sale that puts insurance on the seller for the account of a buyer it may never meet. It also dovetails with the documentary credit, whose banking rules impose a minimum insured amount precisely so that the bank, in the event of loss, finds in the indemnity enough to cover its advance. The problem solved is an indemnity principle applied to the letter, which would leave the buyer compensated and yet out of pocket on the deal.
The Uniform Customs and Practice for Documentary Credits, in the UCP 600 version in force since July 1, 2007, require the insured amount to be at least 110% of the CIF or CIP value of the goods: a shipment invoiced at one million dollars must therefore be covered for 1.1 million at minimum, failing which the bank rejects the documents and the seller is not paid.
assurance sur profit espéré, CIF plus dix pour cent