REPUBLIC ACT NO.

10607 → the party who assumes or accepts the risk of

loss and undertakes for a consideration to
The Insurance Code indemnify the insured or to pay him a certain
sum on the happening of a specified
contingency or event
1. What is the basic concept of insurance?
❖ Insured
→ It is a means by which one seeks to be covered
against the consequences of an event that may → the person in whose favor, the contract is
cause loss or damage operative and who is indemnified against, or
→ The premiums that are paid are accumulated in a is to receive a certain sum upon the
pool from which payment of claims are to be happening of a specified contingency or event
obtained. → the person whose loss is the occasion for the
payment of the insurance proceeds by the
2. Define insurance insurer
→ A contract whereby one undertakes for a
consideration to indemnify another against loss, ❖ The insured is not always the person whom
damage, or liability arising from an unknown or the proceeds are paid. The person paid may
contingent event be the beneficiary designated in the policy.

❖ Contract of insurance - an agreement whereby

6. What are the requisites in order that a
one undertakes for a consideration to indemnify
another against loss, damage or liability arising
person may be insured in a contact of
from an unknown or contingent event insurance?
a. He must be competent to enter into a contract
❖ Contract of suretyship - shall be deemed to be an b. He must possess an insurable interest in the
insurance contract only if made by a surety who or subject of insurance
which, as such, is doing an insurance business as c. He must not be a public enemy
hereinafter provided
❖ Public enemy – it is a nation with whom the
❖ Insurance policy – formal written instrument Philippines is at war, and it includes every
evidencing the contract of insurance entered into citizen or subject of such nation
between the insured and the insurer
7. What are the events covered by Insurance?
3. Explain the term “doing an insurance → Any contingent or unknown event, whether
business or transacting an insurance past or future, which may damnify a person
having an insurable interest, or create a liability
business.”
against him.
a. Making or proposing to make, as insurer, any
insurance contract
b. Making or proposing to make, as surety, any ❖ Contingent event – one that is not certain to
contract of suretyship as a vocation and not as take place
merely incidental to any other legitimate ❖ Unknown event - is one which is certain to
business or activity of the surety happen, but the time of its happening is not
c. Doing any kind of business, including a known
reinsurance business, specifically recognized ❖ Past event - may be a designated event only in
as doing insurance business cases where it has happened already but the
d. Doing or proposing to do any business in parties do not know about it, e.g., prior loss of
substance equivalent to any of the foregoing a ship at sea

❖ An entity can still be deemed engaged even if 8. What are the characteristics and nature of
he does not derive any profit from the activity. insurance contract?
a. Consensual
4. What are the elements of an insurance → perfected by the meeting of the minds of the
contract? parties
a. Subject matter in which the insured has an
insurable interest b. Voluntary
b. Consideration which refers to the premium General rule:
payments based on probability of loss and It is not compulsory and the parties are free
extent of liability to incorporate such terms and conditions they
c. Object and Purpose which is the transfer and may deem convenient provided they are not
distribution of risk of loss, damage or liability contrary to law or public policy.
d. Cause which refers to an event or peril insured Exceptions:
against → IC particularly liability insurance, may be
e. A meeting of minds of the parties upon all the required by law in certain instances:
foregoing essentials • For motor vehicles
• For employees
❖ Peril – the contingent or unknown event which → Those insurance w/c may arise by operation
may cause a loss; its existence creates a risk of law e.g. social insurance of SSS and GSIS
and its occurrence results in loss
c. Aleatory
5. Who are the parties to the contract of → depends upon some contingent event
insurance?
❖ Insurer
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 → obligation of the insurer to pay depends on the
happening of an uncertain event, or though 10. What are the 3 types of insurance contract?
certain, is to occur at an indeterminate time ❖ A policy is either open, valued or running:
→ it cannot be considered as gambling, a. Open Policy
wagering, or a contract of chance because the → one in which the value of the thing insured is
risk is created by the contract itself not agreed upon, and the amount of the
insurance merely represents the insurer’s
d. Executory and unilateral, but synallagmatic maximum liability
→ Once the insured pays the premium, the → the value of such thing insured shall be
contract already takes effect ascertained at the time of the loss
→ After payment of premiums, the insurance
imposes a unilateral obligation on the insurer b. Valued Policy
who promise to indemnify in case of loss → one which expresses on its face an
→ Synallagmatic and reciprocal - even if the agreement that the thing insured shall be
contingent event does not occur, the insurer valued at a specific sum
has still provided protection against the risk
c. Running Policy
e. Conditional → one which contemplates successive
→ subject to conditions, the principal of which is insurances, and which provides that the
the happening of the event insured against object of the policy may be from time to time
defined, especially as to the subjects of
f. Contract of Indemnity insurance, by additional statements or
→ the insured who has insurable interest over the indorsements
property is only entitled to recover the amount
of actual loss sustained 11. How are insurance contracts classified?
General rule: ❖ Life Insurance Contract - an insurance on
• applies only to property insurance human lives and insurance appertaining
• an insurance contingent on the life of a thereto or connected therewith
person is not an indemnity contract because a. Individual Life
the value of a life is immeasurable → made payable on the death of the person,
Exception: or on his surviving a specified period, or
• where the basis of the insurable interest of otherwise contingently on the continuation
the policy owner on the life of the insured is or cessation of life
a commercial relationship, then such
contract is an indemnity contract b. Group Life
→ a blanket policy covering a number of
g. Contract of Adhesion individuals who are usually a cohesive
→ IC are already presented to the insured in its group and subjected to a common risk
printed form on a “take it or leave it” basis
→ What is needed only is the adhesion of the c. Industrial Life
insured for the contract to be made → form of life insurance under which the
premiums are payable either monthly or
h. Personal Contract oftener, if the face amount of insurance
→ each party takes into consideration the provided in any policy is not more than 500
character, conduct and/or credit of the other times the current statutory minimum daily
and in making of the contract wage in the City of Manila

i. Property d. Microinsurance
→ life insurance policies are assignable or → a financial product or service that meets the
transferrable as they are in the nature of risk protection needs of the poor, where:
property and do not represent a personal (i) amount of contribution, premiums, fees,
agreement between the insurer and the insured or charges, computed on a daily basis,
does not exceed 7.5% of the current
j. Uberrimae Fides Contract daily minimum wage rate for
→ each party is required to deal with each other in nonagricultural workers in Metro Manila
utmost good faith and disclose conditions (ii) max. sum of guaranteed benefits is not
affecting the risk, of which he is aware, or any more than 1,000 times of the current
material fact which he knows and ought to know daily minimum wage rate for
nonagricultural workers in Metro Manila
9. How does the law interpret insurance ❖ Non-Life Insurance Contracts – mainly
contracts? concerned with protecting the policyholder from
❖ Basic rule in interpretation of IC loss or damage caused by specific risks
→ the terms of a contract are to be construed a. Marine Insurance
according to the sense and meaning of the terms → type of transportation insurance which is
which the parties thereto have used concerned with the perils of property in, or
incidental to, transit as opposed to property
❖ By reason of the exclusive control of the insurance perils at a generally fixed location
company over the terms and phraseology of the
insurance contract, ambiguity must be strictly b. Fire Insurance
interpreted against the insurer and liberally in → includes insurance against loss by fire,
favor of the insured, especially to avoid forfeiture lightning, windstorm, tornado or
earthquake and other allied risks, when

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 such risks are covered by extension to fire 16. Why must there be an insurable interest?
insurance policies or under separate → It is essential for the validity and enforceability
policies of the contract or policy
❖ As a deterrence to the insured
c. Casualty Insurance
→ insurance covering loss or liability arising → a policy issued to a person without interest is a
from accident or mishap, excluding mere wager policy or contract and is void for
certain types of loss which falls exclusively illegality
within the scope of other types of insurance ❖ As a measure of limit of recovery
such as fire or marine → insurable interest is the measure of the upper limit
of his provable loss under the contract
❖ Contracts of Suretyship → sound public policy requires that insurance should
→ an agreement whereby a party called the
not provide the insured means of making a net
surety guarantees the performance by profit from the happening of the event insured
another party called the principal or
against
obligor of an obligation or undertaking in
favor of a third party called the oblige
→ it shall be deemed as IC if the surety’s
17. When is there insurable interest in life
main business is that of suretyship, and insurance?
not where the contract is merely incidental ❖ Interest in One’s Own Life
to any other legitimate business or activity → Cestui que vie is the insured himself. The
of the surety insured can designate anyone to be the
beneficiary of the policy.
12. How are insurance contracts construed? → The beneficiary designated need not have any
→ IC are to be construed according to the sense and interest in the life of the insured when person
meaning of the terms which the parties takes out policy on his own life.
themselves have used. → But if a person obtains a policy on the life of
→ If such terms are clear and unambiguous, they another and names himself as the
must be taken and understood in their plain, beneficiary, he must have insurable interest
ordinary and popular sense. therein.
→ Accordingly, in interpreting the exclusions in an IC,
the terms used specifying the excluded classes ❖ Interest in Life of Another
therein are to be given their meaning as understood → In life insurance, unless based on commercial
in common speech. relationship, the policy owner does not
necessarily have “pecuniary interest” on the
life of the cestui que vie. Mere relationship is a
13. What perils or risk may be insured? sufficient interest to be insured.
→ The ff. risks may be insured: → The insurable interest exists whenever the
1. Any contingent or unknown event whether past insured has a responsible expectation of
or future which may cause damage to a person deriving benefit from the continuation of the
having an insurable interest life of the other person or of suffering
2. Any contingent or unknown event, whether past detriment through its termination.
or future, which may create liability against the → There is no insurable interest in the life of an
person insured illegitimate spouse.
14. What are Variable contracts of insurance?
→ any policy or contract on either a group or on an 18. When is there insurable interest in the life
individual basis issued by an insurance company and health?
providing for benefits or other contractual ❖ General rule:
Interest in the life or health of a person must
payments or values thereunder to vary so as to
exist when the insurance takes effect (at
reflect investment results of any segregated
inception), but need not exist thereafter or
portfolio of investments or of a designated when the loss occurs.
separate account in which amounts received in
connection with such contracts shall have been ❖ Exceptions:
placed and accounted for separately and apart a. In the case of a creditor’s insurance taken on
from other investments and accounts the life of the debtor, insurable interest
→ may also provide benefits or values incidental disappears once the debt has been paid. At
thereto payable in fixed or variable amounts, or this point, the creditor/insured can no longer
both recover on the policy;
b. In the case of a company’s insurance taken
❖ No insurance company authorized to transact on the life of an employee, insurable interest
business in the PH shall issue, deliver, sell or use disappears once the employee leaves the
any variable contract, unless and until such company, in which case, the company can no
company shall have satisfied the Commissioner. longer recover on the policy.

15. What is insurable interest?

→ every interest in property, whether real or 19. When is there insurable interest in the
personal, or any relation thereto, or liability in property and other insurance?
respect thereof, of such nature that a ❖ General rule:
contemplated peril might directly damnify the Interest in property insured must exist both at
insured inception and at time of loss, but not in the
intervening period.

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 ❖ Exceptions: (3) Otherwise specified in
a. Change in interest over the thing insured after contingently or policy,
the loss contemplated cessation of life otherwise
insurer has no
b. Change of interest in one or more several
liability
distinct things, separately insured by one
policy
c. Change in interest by will or succession upon Delivery of General rule: (1) Within 30 days
proceeds The proceeds after:
the death of the insured should be delivered a. Proof of loss is
d. Transfer of interest by one of several immediately upon received by
partners, joint owners, or owners in common maturity of policy insurer; and
who are jointly insured. The acquiring co-owner b. Ascertainment
has the same interest; his interest merely Exceptions: of loss or
increases upon acquiring other co-owners (1) If payable in damage is
interest installments or made either by
as an annuity, agreement
20. What is a beneficiary? when such between the
installments or insured and
❖ person who is named or designated in a contract annuities insurer or by
of life, health, or accident insurance as the one become due arbitration
who is to receive the proceeds or benefits which (2) If maturity is (2) If ascertainment
become payable, according to the terms of the upon death, is not made
contract, if the insured risk occurs within 60 days within 60 days
after after such
21. Who can be a beneficiary? presentation of receipt by
❖ General rule: claim and filing insurer of proof
of proof of death of loss, then
A person may designate a beneficiary, irrespective of insured loss or damage
of the beneficiary’s lack of insurable interest, shall be paid
provided he acts in good faith and without intent to within 90 days
make the transaction merely a cover for a forbidden after such
wagering contract receipt

22. Are there any exceptions? Effect of (1) This entitles the beneficiary to collect
❖ Exceptions: refusal or interest on the proceeds of policy for the
Any person who is forbidden from receiving any failure to duration of the delay at rate of twice
donation cannot be named beneficiary of a life pay claim the ceiling prescribed by the
within time monetary board (unless refusal to pay
insurance policy by the person who cannot make
prescribed is based on ground that claim is
any donation to him. The ff. donations are void: fraudulent)
a. Those made between persons who were guilty (2) In case damages are awarded, this
of adultery or concubinage at the time of the includes attorney’s fees and other
donation expenses incurred due to delay (plus
b. Those made between persons found guilty of the interest)
the same criminal offense
c. Those made to a public officer or his wife,
descendants and ascendants, by reason of
his office ❖ Claims settlement – indemnification of the loss
suffered by the insured
23. When is the insurance contract perfected?
❖ IC are perfected by mere consent, and the parties
are bound to the fulfillment of what has been
26. What are unfair claim settlement practices?
expressly stipulated and the consequences → The ff. shall constitute unfair claim settlement
which, according to their nature, may be in keeping practices:
with good faith, usage and law. a. Knowingly misrepresenting to claimants
❖ Consent is manifested by the meeting of the offer pertinent facts or policy provisions relating to
and the acceptance upon the thing and the cause coverage at issue
which are to constitute the contract. The offer must b. Failing to acknowledge with reasonable
be certain and the acceptance absolute. promptness pertinent communications with
respect to claims arising under its policies
24. Define premium c. Failing to adopt and implement reasonable
→ the agreed price for assuming and carrying the standards for the prompt investigation of claims
risk, that is, the consideration paid an insurer for arising under its policies
undertaking to indemnify the insured against the d. Not attempting in good faith to effectuate
specified peril prompt, fair and equitable settlement of claims
submitted in which liability has become
reasonably clear; or
25. Discuss the process of the insurance
e. Compelling policyholders to institute suits to
claims settlement recover amounts due under its policies by
offering without justifiable reason substantially
Non-life less than the amounts ultimately recovered in
Claims Life Insurance
insurance suits brought by them
Maturity Either: (1) Upon
(1) Upon death of happening of
the person event insured
insured against
(2) Upon his (2) Event must
surviving a occur within the
specific period period
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 27. Period to be observed in payment of claims

Non-life
Claims Life Insurance
insurance
Delivery of General rule: (3) Within 30 days
proceeds The proceeds after:
should be delivered c. Proof of loss is
immediately upon received by
maturity of policy insurer; and
d. Ascertainment
Exceptions: of loss or
(3) If payable in damage is
installments or made either by
as an annuity, agreement
when such between the
installments or insured and
annuities insurer or by
become due arbitration
(4) If maturity is (4) If ascertainment
upon death, is not made
within 60 days within 60 days
after after such
presentation of receipt by
claim and filing insurer of proof
of proof of death of loss, then
of insured loss or damage
shall be paid
within 90 days
after such
receipt

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