Professional Documents
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Policy of Insurance
Policy of Insurance
Definition
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Form
The contract may be informal, e.g. as a binding slip, or a written
application informally accepted.
The contract may be formal, being the carefully drawn written policy in
customary use.
The policy must be in written form. Any word, sign, symbol, etc.
necessary to complete the contract of insurance shall be written on the
blank spaces provided in the policy.
In case of conflict between the written and printed portions of a policy,
the written portion prevails.
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The period of time during which the insurer assumes the risk of loss is
known as the life of the policy. (12 mos. annual policy; <12 mos.
short period policies)
Papers attached to the policy and their binding effects (rider,
warranties, clause, and endorsement)
Generally, the rider, slip or other paper becomes a part of a contract or
policy of insurance if properly and sufficiently attached or referred to
therein in a manner as to leave no doubt as to the intention of the parties
in such respect.
Section 226: no rider shall be attached to, printed, or stamped upon a
policy of insurance unless the form of such rider has been approved by
the Insurance Commissioner.
A rider, clause, warranty or endorsement is not binding on the insured
unless the descriptive title or name of the rider, etc. is also mentioned
and written on the blank spaces provided in the policy.
Warranties are inserted or attached to a policy to eliminate specific
potential increases of hazard owing to (1) actions of the insured or (2)
condition of the property.
A clause is an agreement between the insurer and the insured on
certain matter relating to the liability of the insurer in case of loss.
An endorsement is any provision added to an insurance contract
altering its scope or application. (Like extending the perils covered)
An endorsement may be in the nature of a permit such as one
authorizing the removal of the insured property and providing
for coverage in another location.
As to the lack of signature:
General Rule: If the rider is physically attached to a policy of
insurance contemporaneously with its execution and delivered to the
insured so attached, and sufficient reference is made in the policy,
the fact that it is without the signature of the insurer or of the insured
will not prevent its inclusion and construction as a part of the
insurance contract.
Same rule as above if the rider, although issued after the
original policy, was applied for by the insured or owner.
Exception: The countersignature of the insured or owner is required
to any rider, etc. not applied for by him if issued after the delivery of
the policy. The countersignature shall be taken as his agreement to
the contents of the matter so attached.
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Kinds of policy
1. Open (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
insurers maximum liability.
The value of such thing insured shall be ascertained at the time
of the loss.
It is one in which a certain agreed sum is written on the face of
the policy NOT as the value of the property insured, but as the
maximum limit of the insurers liability.
The insured must establish the FMV of the property at the time of
the loss.
If the FMV exceeds the maximum, the insurer will pay the
maximum.
If the FMV is less than the maximum, the insurer will pay
the FMV.
2. Valued (Sec. 61)
A valued policy is one which expresses on its face an agreement that
the thing insured shall be valued at a specific time.
There are 2 values, the face value and the value of the thing
insured. In the absence of fraud or mistake, the agreed value of
the thing insured will be paid in case of total loss of the property.
In life insurance, the liability of the insurer is measured by the
face value of the policy.
Example: A policy insuring a ship valued at P50 million is a
valued policy.
3. Running (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 insurance, by additional
statements or indorsements.
Here the risk is shifting, fluctuating, or varying, and which covers
a class of property rather than any particular thing.
In some cases, the nature of the property insured or the
circumstances are such as to make it impossible to designate the
subject matter of insurance with certainty or particularity. These
policies are usually known as floating, running, or blanket.
A blanket policy (in the US) is one covering by a single amount of
insurance the same kind of property at different locations or
different kinds of property at a single location.
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