ORIGIN OF INSURANCE AND LAWS GOVERNING INSURANCE Flashcards
What are the laws governing Insurance?
First is the Insurance Code of the Philippines. In the absence of applicable provisions in the Insurance Code, the Civil Code applies in suppletory character.
In the absence of applicable provisions from the said laws, the general principles prevailing on the subject, the US laws, particularly in the State of California, applies. This is because the Insurance Code of the Philippines is patterned after the laws of the said state.
What are the new concepts introduced by the New Insurance Code?
There are three concepts that were introduced by the New Insurance Code to enhance the business of the business of Insurance. These are the following; microinsurance, bancassurance, trust for charitable uses, trust business of insurance companies, and industrial life insurance.
What is microinsurance?
Microinsurance is a financial product or service that meets the risk protection needs of the poor where the amount of contributions, premiums, fees, or charges, computed on a daily basis, does not exceed 7.5% of the current daily minimum wage rate for nonagricultural workers in Metro Manila.
The maximum sum of guaranteed benefits is not more than 1,000 times of the current daily minimum wage rate for nonagricultural workers in Metro Manila.
What is Bancassurance?
Bancassurance is the presentation and sale to bank customers by an insurance company of its insurance products within the premises of the head office of such bank duly licensed by the BSP or any of its branches under such rules and regulations which the Commissioner and the BSP may promulgate.
What is industrial life insurance?
Industrial life insurance is a form of life insurance under which the premiums are payable monthly or oftener. It is industrial life insurance if the face amount of insurance provided in any policy is not more than 500 times than that of the current statutory daily minimum wage of the City of Manila, and if the words “industrial policy” are printed upon the policy as part of the descriptive matter.
Distinguish between Microinsurane and Industrial Life Insurance
Industrial life insurance and microinsurance have different maximum amount. The maximum amount of Microinsurance is not more than 1,000 times of the current daily minimum wage of Manila while for Industrial Life insurance, it is not more than 500 times than that of the current statutory minimum wage in the City of Manila.
No limitation as to premiums is provided for Industrial life Insurance. On the other hand, the amount of contributions, premiums, charges, or fees for Microinsurance should not exceed 7.5% of the current daily wage rate for non-agricultural workers in Metro Manila.
As to nonpayment of premium, Industrial life insurance policy shall not lapse if such non-payment was due to the failure of the insurer to send a collector unless it covers a period which is longer than a period of 1 month. Microinsurance do not have such a rule and the policy will lapse if the premium is not paid.
In case of Industrial life Insurance the insured has a grace period of 30 days within which to pay the premium, however, Microinsurance does not have such grace period privilege.
As to the scheme of the policies, the premiums of Industrial Life Insurance are payable monthly or oftener, but there is no such scheme in Microinsurance.
What is a variable contract?
A variable contract is any policy or contract on either a group or on an individual basis issued by an insurance company providing for benefits or other contractual payments or values there under to vary as to reflect investment results of any segregated portfolio of investments or of a designated separate account in which amounts received in connection with such contracts shal have been placed and accounted for separately and apart from other investments and accounts.
Should a common law wife [will the legal wife is alive] be qualified as a beneficiary?
No. The common law wife, while the legal wife is alive, cannot be qualified as beneficiary.
There being no provision under the Insurance Code regarding this matter, the Civil Code must be applied. Pursuant to the Art. 739 of the Civil Code, donations, made between persons who are guilty of adultery or concubinage at the time of donation, are deemed void. Further, it states in another provision that any person who are forbidden from receiving any donation under Art. 739 are cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him.
In this case, since the legal wife is still existing, the common law and the husband are committing concubinage. Thus, the common law wife is disqualified by the Civil Code to be a beneficiary of the insurance policy.
Will the nonpayment of premiums be excused because of war?
There is neither an applicable provision in the Insurance Code nor in the Civil Code. Thus, what must be applied is the general principles of law prevailing on the subject in the US.
Under the US rule, it is declared that the contract is not merely suspended, but is abrogated by reason of non-payment of premiums, since the time of payment is peculiarly of the essence of the contract.
How may a contract of insurance be perfected?
A contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents.
Thus, it is only when the insurer accepts the application and communicates the same to the applicant that the contract of insurance is perfected.
Is perfection and effectivity different?
Yes, perfection and effectivity are different. A contract may be perfected and binding but not effective. No policy shall be valid and binding unless and until the premiums are paid.
So while contracts are perfected by mere consent, it shall not be effective until premiums are paid.
How should a contract of insurance be construed?
If the terms of a contract are clear and leaves no doubt upon the intention of the contracting parties, the literal meaning of the stipulations must shall control. Hence, in case there is no doubt as to the terms of an insurance contract, the provisions must be construed in their plain, ordinary and popular sense.
However, when the terms of the policy are ambiguous, uncertain or doubtful, they should be interpreted strictly against the insurer and liberally in favor of the insured because the insured has no voice in the selection of the words used, and the language of the contract is selected by legal advisers of the insurance company.
Why must an insurance contract be interpreted against the insurer and liberally in favor of the insured?
Insurance contracts are contracts of adhesion or adherence.
This means that they are preapred only by the insurer and imposed upon parties dealing with it which may not be changed, the latter’s participation in the agreement being reduced to the alternative to take it or leave it. In contrast to those entered into by parties bargaining on an equal footing and therefore, any ambiguity thereon must be resolved against the insurer.
What is the Contra Proferentem Rule?
This rule is otherwise know as the Ambiguity doctrine. It is the same as an adhesion contract principle. Contra Proferentem Rule provides that in the interpretation of documents, ambiguities are to be construed against the drafter.
By its very nature, the precept assumes the existence of an ambiguity in the contract, which is why it is applicable only when there is doubt.
What is a contract of insurance?
A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
What are the elements of Insurance?
Aside from the essential requisites of an ordinary contract, an insurance contract must have the following elements
- The insured possesses an interest of some kind susceptible of pecuniary estimation, known as insurable interest.
- The insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated perils.
- The insurer assumes the risk of loss.
- Such assumption is part of a general scheme to distribute actual losses among a l large group of persons bearing somewhat similar risks.
- As consideration for the insurer’s promise, the insured makes a ratable contribution, called premium to a general insurance fund.
Why is an insurance contract considered a contract of indemnity?
The insurance company shall be liable only if the insured suffers a loss. The insured shall recover all the damages he suffered, and no more than that because the insured is not meant to gain profit from the insurance contract.
Is life insurance a contract of indemnity?
No, life insurance is not a contract of indemnity. No value can be traced in life. Life insurance is based upon the principle of indemnity, only in so far as it cannot exist unless there is insurable interest in the life of the party insured at the time of the making of the contract. But beyond this, the principle of indemnity does not apply to life insurance.
Thus, life insurance policy, as a rule, is not a contract of indemnity, but a contract to pay a certain sum of money in the event of death beacuse life cannot be the subject of valuation nor the loss adjustable to any principle of indemnity.
Why is an insurance contract a personal contract?
This is because the insurer will not be liable to a person who is not insured. Insurance will be applied exclusively to the proper interest of the person in whose name it was issued. It cannot be made payable to a 3rd person as a general rule.
What may be insured?
Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured.
When is the insurer liable for past event or loss that occured before the policy was insured?
Oridinarily, the event covered by the policy is a future contingency. However, a past event may likewise be included within the coverage of a policy. To be so covered, the past event causing the loss must be unknown to both parties and they must expressly stipulate that a prior loss is insured by the policy.
Who are the parties to the contract of insurance?
- The insurer - the person who undertakes to indemnify another by a contract of insurance
- The insured - a person to be indemnified
- The beneficiary - he who receives a benefit or advantage or is entitled to the benefit of a contract.
Who may be an insurer?
Every corporation, partnership, or association, duly authorized to transact insurance business may be an insurer.
Who may be insured?
Anyone except a public enemy may be insured.
Who may insure a mortgaged property?
When a property is mortgaged, the mortgagor and the mortgagee may take out separate policies with the same or different insurance companies. The mortgagor may insure the property mortgaged to the full value of such property while the mortgagee can insure the same only to the extent of the amount of his credit.
What are the effects of Mortgage Redemption Insurance?
There are instances wherein a person borrows money from the bank and the bank will require the insured/borrower to obtain a mortgage redemption insurance. A mortgage redemption insurance is simply a kind of life insurance procured by the mortgagor with the mortgagee as beneficiary up to the extent of the mortgage indebtedness.
What is a Union Mortgage Clause?
A union mortgage clause or its equivalent creates the relation of insured and insurer between the mortgagee and the insurance company independent of the contract with the mortgagor.
Generally, when does a person have an insurable interest in the subject-matter insured?
In general, a person has an insurable interest in the subject-matter insured where he has such a relation or connection with, or concern in, such subject matter that he derive pecuniary benefit or advantage from it preservation or will suffer pecuniary loss or damage from its destruction, termination or injury by the happening of the even insured against.
In life insurance, when does a person have insurable
interest?
Whenever he has a reasonable ground founded on the relation of the party either by blood or affinity, expect some
benefit or advantage from the person from the continuance of life of the insured.
Insurable interest in life however, must be one in favor of the continuance of life and not an interest in its loss or destruction.
Raymart and Claudine was married in 2016. Raymart insured the life of Claudine on January 12, 2017 with Raymart as beneficiary. The marriage was subsequently annulled on February 25, 2018. Claudine was killed by Ramon on May 15, 2018. At the time the insured died, the marriage was already dissolved (annulled). Can Raymart, as beneficiary, still recover from the proceeds of the insurance policy?
(YES) Raymart may recover the proceeds of the policy even if his marriage with Claudine was already anulled at the time of the death of Claudine because insurable interest In life need exist only at the time of the effectivity of the policy and need not
exist at time of the death of the insured, as life Insurance is not a contact of Indemnity.
Who may be BENEFICIARIES?
It is the person for whose benefit the policy is issued and to whom the loss is payable. He is the one cited in the policy as one who will receive the proceed from the policy. Simply put, he is the beneficiary if he gets the benefit.
May the BENEFICIARY in life insurance BE CHANGED?
The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this part In said policy. Notwithstanding the foregoing, In the event the insured does not change the beneficiary during his lifetime, the designation shall be deemed irrevocable.
Who may be the beneficiary in Life insurance?
Beneficiary in Life Insurance is not provided for in the Insurance Code. As we have said, we should apply then the Civil Code. Under the Civil Code, a person may be designated as beneficiary even if he is a stranger to the contract except for persons forbidden from receiving donations under Art. 739 thereof.
Who are those persons prohibited from giving donations to each other under Art. 739 of the CC, therefore disqualified from designating each other as beneficiary in life insurance?
(a) Those made between persons who are guilty of adultery or concubinage at the time of the donation;
(b) Those made between persons found guilty of the same criminal offense, in consideration thereof;
(c) Those made to a public officer or his wife, descendants and ascendants, by reason of his office.
Is prior conviction for adultery or concubinage necessary to disqualify a beneficiary?
With respect to the disqualification of “persons who are guilty of adultery or concubinage”, criminal conviction for the disqualifying offense is not required. The guilt of the insured and beneficiary may be proved by preponderance of evidence in the same action for declaration of nullity of the designation.
When can the consent of a minor to change him as a beneficiary be given by the guardian or parents
A. When a minor however, was designated as beneficiary and the interest of the minor in the policy does not exceed five hundred thousand pesos (P500,000), his consent to the change of beneficiary may be given by his judicial guardian or, in the absence of the latter, by his father or in the latter’s absence or incapacity, his mother.
What is the extent of interest of the beneficiary in
endowment life insurance?
The beneficiary will get the proceed only if the insured dies during the period of endowment. In that case, the interest of the beneficiary is a contingent one. It is subject to a condition, the condition being, the beneficiary die during the period of endowment.
May revocation of a beneficiary be done in the last will and
testament of the insured?
In the event the insured does not change the beneficiary during his lifetime, the designation shall be deemed irrevocable. The revocation of the beneficiary therefore, should be done during the lifetime of the insured. Hence, the revocation of the beneficiary cannot be done in the last will and testament of the insured because it takes effect upon the death of the insured.
