V. THE POLICY, PARTIES THERETO & THEIR RIGHTS THEREON

Question 1

What is the definition of a “policy of insurance”?

Answer 1

The Code defines a “policy of insurance” as a written instrument in which a contract of insurance is set forth.

Question 2

What is the required form of the policy of insurance?

Answer 2

IC. Sec. 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.

Question 3

Are riders, clauses, warranties or endorsements purporting to be part of the contract of insurance and which are pasted or attached to the policy binding on the insured?

Answer 3

Generally, no. However, there is an exception when it is mentioned and written on the blank spaces provided in the policy.

Sec. 50. par. 2. Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy.

Question 4

What is the requirement as regards any rider, clause, warranty or endorsement issued after the original policy?

Answer 4

Sec. 50. par. 3. Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement.

Question 5

May a policy be in electronic form?

Answer 5

Yes. Sec. 50 par. 4. Notwithstanding the foregoing, the policy may be in electronic form subject to the pertinent provisions of RA No. 8792, otherwise known as the “Electronic Commerce Act” and to such rules and regulations as may be prescribed by the Commissioner.

Question 6

What must a policy of insurance specify?

Answer 6

Sec. 51. A policy of insurance must specify:

(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined:
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.

Question 7

What is a rider?

Answer 7

A rider is a printed or typed stipulation contained in a slip of paper attached to the policy and forming an integral part thereof.

The signature of the insured is required only if such riders or endorsements are made or issued after the issue of the original policy.

Question 8

What are cover notes?

Answer 8

Cover notes are temporary or provisional insurance coverage pending the issuance of the policy. There are situations where temporary coverage is required by the insured pending the issuance or renewal of a policy of insurance. These situations are addressed by what are known as “cover notes” or by a “binding slip,” “binding receipt,” or just “binders.” They all refer to a unique type of contract of insurance, in effect an interim policy, until a formal policy is issued.

Question 9

Will the cover note amount to a contract of insurance?

Answer 9

No. The cover note will not amount to a contract of insurance unless there is agreement on the material terms (risk, duration of cover, premium).

Question 10

What is the presumption if the cover note is issued following the expiration of a policy?

Answer 10

If the cover note is issued following the expiration of a policy, the presumption will be that the cover is on the same terms as the old policy.

Question 11

What are the types of non-life insurance policies?

Answer 11

Open; valued; or running. Sec. 59 IC: “A policy is either open, valued or running.”

Question 12

What is an open policy?

Answer 12

IC. Sec. 60. An open policy is one in which the value of the thing insured is not agreed upon, and the amount of the insurance merely represents the insurer’s maximum liability. The value of such thing insured shall be ascertained at the time of the loss.

Question 13

What is a valued policy?

Answer 13

IC. Sec. 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum.

Question 14

What is a running policy?

Answer 14

IC. Sec. 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of the insurance, by additional statements or indorsements.

Question 15

Who are the parties to an insurance contract?

Answer 15

Insurer; Insured; Beneficiaries.

Question 16

Who is the insurer?

Answer 16

Under the Code, “every person, partnership, association, or cooperative duly authorized to transact insurance business as elsewhere provided in this Code, may be an insurer.” The term includes person or entities, except mutual benefit associations, engaged as principals in the insurance business. It also includes “professional reinsurers.”

Question 17

Who may be the insured?

Answer 17

Under Sec. 7 of the IC, “anyone except a public enemy may be insured.” Filipinas Cia de Seguros v. Christern, Huenefeld & Co. defined public enemy as “one where a person possesses the nationality of the state with which another is at war.”

Question 18

What is the effect of a war on an insurance contract where the insured is of enemy nationality?

Answer 18

The contract of life insurance is deemed abrogated, not merely suspended during the war.

Question 19

Is a wife required to seek the consent of her husband to obtain an insurance contract?

Answer 19

No. Under the Sec. 3 of the IC, an insurance policy taken by a married woman on her life or that of her children does not require the consent of the husband.

Question 20

Who is the beneficiary in a life insurance contract?

Answer 20

In life insurance, the beneficiary is the one who will get the proceeds upon the death of the insured.

Question 21

Must the beneficiary have an insurable interest on the life insured?

Answer 21

The beneficiary need not have any insurable interest in the life of the insured. As such, the insured may designate even a stranger.

Question 22

If the irrevocable beneficiary predeceased the insured, what happens to the insurance proceeds?

Answer 22

Where the irrevocable beneficiary predeceased the insured, the estate of the beneficiary is entitled to the proceeds of the policy.

Question 23

When does a beneficiary forfeit the benefits of the insurance contract?

Answer 23

A beneficiary who intentionally kills the insured cannot, and should not, recover the insurance proceeds.

Sec. 12. IC. 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 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.

Question 24

What are the rights of the insured in a life insurance policy?

Answer 24

The rights of the insured in a life insurance policy are:

1. Right to assign the policy
2. Right to exercise non-default options
3. Right to reinstate a lapsed life insurance policy
4. Right to borrow on the policy
5. Right to dividends
6. Other rights

Question 25

What is the difference between a “participating” or “non-participating” life insurance contract?

Answer 25

A “participating” life insurance contract entitles the insured to dividends while the “non-participating” does not. Under Sec. 233(e) of the Code, “If the policy is participating, a provision that the company shall periodically ascertain and apportion any divisible surplus accruing on the policy under conditions specified therein.” These dividends may be either: (a) paid in cash; (b) applied to the next premium; or (c) retained with the company to accumulate interest, as may be provided in the policy.