Insurance (Handout ni Ma'am) Flashcards
It is a contract whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.
Insurance
It is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206.
Contract of suretyship
It shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.
Parties in a contract of suretyship
- Surety - guarantees the performance by another part
- Principal or obligor
- Obligee
It is a means by which one seeks to be covered against the consequences of an event that may cause loss or damage.
Insurance
What are the things that may be insured?
Any contingent or unknown evnet, whether past or future, which may damnify a person having an insurable interest, or create a libility against him.
Can there be a policy or insurance for or against the drawing of any lottery, or for or against any game of chance?
WINNINGS FROM THESE LOTTERY GAMES and other games of chance are CONSIDERED PROFITS/GAIN HENCE it is INCONSISTENT WITH THE DEFINITION of insurance which pertains to indemnity to the insured against loss.
What are the distinguishing elements of an insurance?
(5)
- The insured possesses an insurable interest susceptible of pecuniary estimation
- insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated peril (referring to specific risks or events explicitly listed in an insurance policy as covered circumstances.) Ex. Fire, theft, natural calamities, such as earthquakes, or floods.)
- the insurer assumes that risk of loss
- such assumption is part of a general scheme to distribute actual losses among a large group or substantial number of persons bearing somewhat similar risks.
- the insured makes relatable contribution (premium) to a general fund
Characteristics of an Insurance Contract
(7)
- Consensual - perfected by the meeting of the minds of the parties
- Voluntary - (not compulsory). Parties may incorporate such terms and conditions as they may deem convenient which will be binding provided they do not contravene to any provision of law and are not opposed to public policy.
- Aleatory - it depends upon some contingent event/ it also refers to the element of chance or uncertainty that is inherent in insurance contracts. Both parties accept the possibility of gain or loss based on unpredictable events.
- Executory (Synallagmatic)- Insured when he experiences a loss, shall be paid out of his claims by the insurer while the insured has the obligation to pay his premiums. Until terminatiorn the obligation subsists.
- Conditional - Subject to the happening of the event insured against. Insurer’s obligation to provide coverage and pay out claims is contingent upon certain conditions being met.
- Contract of Indemnity - covers the loss/make good the value of the policy and not dependent on earning capacity of the insured at the time of death. The insured is entitled to recover only the amount of total loss sustained, and the burden is upon him to prove the amount of such loss.
- Personal Contract - It is based on the principle of utmost good faith. There should be a high level of trust between the insured and the insurer.
What are the Classes of Insurance Contracts?
(5)
- Life
- Marine
- Fire
- Casualty or a liability insurance
- Suretyship
What are the kinds of Life Insurance?
(7)
- Individual Life - a coverage for a single person
- Group Life - usually provided by employers or organizations, or associations. It can be offered as a benefit. It entails lower premiums as the risk is spread across the entire group. The coverage would usually end if the member leaves the group or if it has an option to convert the coverage into another type.
- Industrial Life - also known as burial insurance or final expense insurance. It is usually offered to an individual who may not qualify for traditional life insurance policies due to health issues or other factors.
- Term life - provides coverage for specified period of time. After paying period and the insured outlives the policy, it is usally converted into a permanent life insurance policy.
- Universal Life - a type of permanent life insurance that offers more flexibility compared to traditional whole life insurance. It provides death benefits to beneficiary, but it includes savings component such as cash value, and the latter to earn interest over time. Insured may apply for loan or withdrawals subject to conditions and tax implications. This is Life with accumulated savings over long period of time.
- Variable Life -
- Whole Life - It is a type of permanent life insruance that provides coverage for the entire life of the insured individual, as long as the policy is in force, and it can include a cash value component.
What is a Variable Insurance?
- It is a type of permanent life insurance that offers both a death benefit and a cash value component that can fluctuate based on the performance of underlying investment options, such as mutual funds.
- Policy holders can have the option to invest a portion of the premiums in stocks, bonds, money market or other investment portfolio.
- It refers to any policy or contract issued by an insurance company providing for benefits under such contract that reflects investment results to a group or individual.
- it may either be investment-linked or equity-linked.
- this covers portfolio accounts.
It provides protection against losses or damages to ships and cargoes, terminals, and any transport or cargo by which property is transferred, acquired or held between points of origin and the final destination. It covers risks associated with marine activities, such as theft to cargoes, damage to vessel, collisions, injuries or damages to third persons,
It can include hull insurance- covering the ship itself, cargo, or covering legal liabilities arising from marine activities.
Marine Insurance
It covers primarily the land or over the land transportation perils of property shipped by railrods, motor trucks, airplanes, and other means of transportation. It also covers risks of lake, river, or other inland waterway transportation and other waterbase perils outside of those risks that fall definitely within the ocean marine category.
Inland Marine Insurance
What are included in Fire insurance?
Insurance against the loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies. It covers losses and damages caused by fire, to buildings, structures, and personal properties. Damage by smoke and firefighting efforts are covered, it can also include coverage for living expenses if the property becomes uninhabitable due to fire damage.
It can cover broader risks such as theft, liability and natural disasters, for a long as they are included in the policy.
Casualty or a liability insurance covers?
Covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope or other types of insurance such as fire or marine.
When is an Insurance Contract perfected?
- It is a consensual contract and is therefore perfected at the moment there is a meeting of the minds with respect to the object and the cause or consideration;
- meeting of the minds pertaining to the offer and acceptance upon the thing and the cause which are to constitute the contract
- it is required that the offer must be certain and the acceptance must be absolute
- under art 1319 — a qualified acceptance constitutes a counter offer
- offer can be done thru an agent/or in person same as in acceptance
Insurance follows the “cognition theory” hence, an acceptance made by the letter of offer shall bind the person except from the time it came to his knowledge
Who are the Parties to an Insurance Contract?
- Insurer
- Insured
- Beneficiary
Who is the person who receives the proceeds or benefits of an insurance policy upon its maturity?
Beneficiary
Who can be insured?
Anyone can be insured except a public enemy.
Who is considered a public enemy?
A nation at war with the Philippines and every citizen or subject of that country. — the purpose of war is to destroy the resources of the enemy thus it is inconsistent with the principle of preservation- It is absurd paying the value of what has been destroyed intentionally due to war.
When is there insurable interest?
When the insured has such a relation or connection with, or concern in, such subject matter that he will derive pecuniary benefit or advantage from its preservation or will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the vent insured against.
How can an interest of a beneficiary be forfeited?
The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured. In such a case, the share forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries, the proceeds shall be paid in accordance with the policy contract. If the policy contract is silent, the proceeds shall be paid to the estate of the insured.
What is the test or measure of insurable interest in property?
Whether one will derive pecuniary benefit or advantage from its preservation or will suffer pecuniary loss or damage from its destruction.
- extent to which the insured might be damnified by loss or injury thereof.
An insurable interest in property may consist in:
(3)
- An existing interest on the subject matter of the policy at the time the policy is issued.
- Inchoate interest founded on an existing interest – refers to an interest that is not yet fully developed or perfected but is expected to become vested or realized in the future.
- Expectancy- coupled with an existing interest in that out of which the expectancy arises. Occurs when the insured’s anticipation of receiving a benefit from ther insurance policy is accompanied by their already established legal or financial interest in the subject matter.
A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof.
Section 15
A mere contingent or expectant interest in any thing, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable.
Section 16
An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.
Section 19
- It is a neglect to communicate that which a party knows and ought to communicate.
- refers to withholding or failure to disclose material information by the insured to the insurer during the application or underwriting process.
Concealment
These are statements or assertions made by the insured during application or underwriting process.
Representations
Does the intent matter in concealment?
No. There is concealment whehter it is intentional or unintentional.
What happens if it is proven that there is concealment and misrepresentations?
It entitles the injured party to rescind a contract of insurance or deny a claim.
It exists where the same person is insured by several insurers separately in respect to the same subject and interest.
Double Insurance
Where the insured in a policy other than life is over insured by double insurance:
- The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts;
- Where the policy under which the insured claims is a valued policy, any sum received by him under any other policy shall be deducted from the value of the policy without regard to the actual value of the subject matter insured;
- Where the policy under which the insured claims is an unvalued policy, any sum received by him under any policy shall be deducted against the full insurable value, for any sum received by him under any policy;
- Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves;
- Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.
It is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance.
Contract of Reinsurance
It is presumed to be a contract of indemnity against liability, and not merely against damage
- It is the process of legal substitution where the insurer steps into the shoes of the insured and he avails of the latter’s rights against the wrongdoer at the time of loss.
- It is a normal incident of indemnity insurance as a legal effect of payment
- It inures to the insurer without any formal assignment or any express stipulation to that effect in the policy.
- SAID RIGHT IS NOT DEPENDENT UPON NOR DOES IT GROW OUT OF ANY PRIVATE CONTRACT
- PAYMENT OF THE INSURED MAKES THE INSURER A SUBROGEE IN EQUITY.
Principle of Subrogation
This rule applies only to property insurance
-only the amount that the insurer could recover himself to the third person.
Purpose of Principle of Subrogation
(3)
- To make the person who caused the loss legally responsible
- To prevent the insured from receiving a double recovery from the wrongdoer and the insurer
- To prevent tort-feasors from being free from liabilities and is thus founded on consideration and public policy.
To prevent unjust enrichment and ensuring that the party ultimately responsible for the loss bears the financial reponsibility
Principle of Subrogation
Cases when there is no subrogation
(5)
- Waiver to the third person by the insured
- When the insurer pays without notifying the carrier as to the value of the loss—prov. The carried acted in good faith
- Insured pays for the loss
- In life insurance
- Loss in in excess of the insurance coverage
What is the time frame allowed to settle claims?
It should be paid immediately upon maturity, unless its dependent upon death, so settlement must be done within 60 days after presentment of proof of claim, and death certificate.
Unless, it is payable on an installment basis or as an annuity, where the poiicy could provide that payment be made yearly for the next 5 or 10 years.
Failure to do so would require the insurer to pay interest to the insured or the beneficiary of interest of twice the ceiling prescribed by the Monetary Board, unless the claim is deemed to be fraudulent.
For insurance other than life—30 days upon agreement of the parties as to settlement, if by agreement or arbitration
Or if within 60 days no ascertainment has been obtained by arbitration, or agreement the claim should be settled within 90 days.
Who determines if the claim is fraudulent?
the Commissioner or the Court
