insurancereview.day2

8/13/2019 insurancereview.day2

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Insurance Law in General

Life Insurance


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What may be insured against

Insurable Interest

Life Insurance Policy

Premiums

Parties


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Sec. 179 - Life Insurance -insurance on human lives and

insurance appertaining theretoor connected therewith

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Contingencies

Death

survival of a specific period

continuance or cessation of life

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Actual death

Living death

Retirement death

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Sec. 187-A, 9thpar - Health,accident and disabilityinsurance are deemed asboth life and non-life

insurance and such may beissued by either life or non-life insurance companies.

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General Rule: NO.

BASIS:

Sec. 87 - insurer is not liable if loss iscaused by willful act or connivance ofthe insured; and

Rules of Court disputablepresumptions: a person is presumed tointend the consequences of hisvoluntary acts

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If insured was not in his right mind/insane atthe time of suicide

If insured committed suicide after the policyhas been effective for at least 2 years fromissuance or last reinstatement

Note: The 2-year period can be shortened butnot lengthened

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Relation between the insured and aparticular event such that the happening ofthe event will damnify or cause loss to the

person

PURPOSE OF THE CONCEPT: To avoid wagering

To avoid temptation of bringing about the event

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Section 10

himself, spouse, children

person on whom he depends

wholly or in part for education orsupport or in whom he has apecuniary interest

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any person who is under legalobligation to him for payment of moneyor respecting property or services ofwhich illness or death might delay orprevent performance

any person upon whose life any estateor interest vested in him depends

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Every person has unlimitedinsurable interest in his own life

One also had insurable interest

in the life of his spouse andchildren on the basis of loveand affection

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Article 195, Family Code

Spouses, legitimate ascendants and

descendants

parents and their legitimate children andlegitimate or illegitimate children of the

latter

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Section 10 b)Obligation to give supportArticle 195, Family Code parents and their illegitimate children and

legitimate or illegitimate children of the

latter

legitimate brothers and sisters whether ofthe full or half blood


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Article 196, Family Code Brothers and sisters not legitimately

related,whether of the full or half blood, arelikewise bound to support each otherEXCEPT only when the need for support ofthe brother or sister, being of age, is due to

a cause imputable to the claimants fault ornegligence.

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In cases not falling under 195 and196, mere blood relationship or

affinity does not create insurableinterest

Examples: uncle, aunt, nephew,niece, cousins, son-in-law,

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YES. Factual expectation is enough basis toget a life insurance policy.

Even if the policyholder can support himself,factual expectation that he will one day need

to be supported and 195 and 196 aresufficient basis for a policy on the lives ofpeople who are expected to support him.

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Debtor-Creditor

Employer-Employee - ElOriente v. Posadas

Business partners

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Person is given the right to usea house and lot

Right ceases when the ownerdies and another personbecomes the owner

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SEC. 19 - GENERAL RULE: Whenthe insurance takes effect, but

need not exist thereafter orwhen the loss occurs

Exception: when capable ofpecuniary estimation

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SEC. 183 - GENERAL RULE: Face value ofthe policy

Except: pecuniary estimation is possible

[10]

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Usual rules re insurable interestare generally not made applicable

in industrial life because:

Proceeds are small, little danger

to induce a person to kill

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Special Rule in insurableinterest in industrial life Investigation of presence of insurable

interest will nullify speedy payment ofproceeds under the facility of payment

clause

The costs to prove insurable interest will

destroy the purpose for this type ofinsurance


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Industrial life if beneficiary does not surrenderpolicy or beneficiary is the estate of insured OR legally incompetent payment may be made to

the executor or administrator of insured or any of insur srelative by blood as legal adoption or by marriage or any person who incurred expenses for maintenance, medicalattention or burial

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GENERAL RULE: printed form

EXCEPTIONS: group life and annuitycontracts which may be typewritten

Contains blanks where word, phrase,

clause, mark, sign necessary to completethe policy are placed

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Parties

amount to be insured

premium

life insured

risks

period of effectivity 11/01/06


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Grace period provision provisionwhich gives the insured additional time topay his premiums from the due date

Clarifies the right to collect if death happenswithin the grace period

Individual life 30 days/1 month Group life 30 days/1 month

Industrial life 4 weeks or if payable monthly 30 days/1 month

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Entire contract provision Thepolicy shall constitute the entire

contract between the parties

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Misstatement of age provision if the age of the insured is

misstated, the amount payableshall be as such premiumwould have purchased at the

correct age

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Reinstatement provision clarifies the requirements forrestoring a policy to premium-

paying status after it has lapsed.

Individual 3 years

Group no reinstatement Industrial 2 years

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Loan privilegebased on the cashsurrender value, the insured mayobtain a loan by pledging the

policy

Policy dividend options if thepolicy is participating, thepolicyholder is entitled to a shareof the surplus.

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Exemption from claims of creditorsprotection against execution

Income tax treatmentproceeds oflife insurance policies are generally

tax exempt. However, endowmentproceeds and cash surrendervalues are treated as income andare taxable.

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Surrender options if thepolicyholder cannot continue

paying the premiums, he hassome options which will notput to waste what he has paid.

However, these options areavailable only upon paymentof at least 3 annual premiums

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Surrender Options Cash Surrender Value

Extended Insurance

Paid-up Insurance

Automatic Premium Loan


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Cash Surrender Value227 f); 230 f) and g)payment of at least 3annual premiums

not less than the reserveon the policy

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10 years to pay annual premium ofP20,000

Premium rate from the start isP20,000 until end of term even ifP10,000 is enough annual premiumfor the 1st5 years

The excess amount is called thereserve and this is the source of thecash surrender value

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Extended InsuranceAt least three annualpremiums

limited time, same face

value

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ORIGINAL POLICY: Covered until age70, with face value of P1 Million

Extended Insurance: Covered until age60 only but face value is still P1 Million

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Paid-Up InsuranceAt least three annual

premiumssame period, lower

proceeds

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ORIGINAL POLICY: P1 Million covered untilage 70

PAID-UP INSURANCE: P500,000 covereduntil age 70

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Automatic Premium LoanParties agree that in case

of default insureradvances the premiumnot subject to repayment

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