INSURANCE

40MCQ
12Essays

1. Definition of Different Types of Insurance

a. Fire insurance
- Insurance against 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
b. Casualty insurance
- 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 of other
types of insurance such as fire or marine
c. Suretyship
- 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
d. Life insurance
- An insurance policy the proceeds of which are payable either upon
a. Death of the person
b. His surviving a specified period or
c. On the continuance or cessation of life

e. Marine insurance
- Covers loss or damage to property, and even to persons, in connection with all risks or
perils of navigation

2. Doing an Insurance Business

a. Making or proposing to make, as insurer, any insurance contract
b. Making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety
c. Doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code
d. Doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code

3. Insurable Interest
- Interest which the law requires a person making a contract of insurance to have in the
thing or person insured so that the contract may escape the charge of a wagering
contract
- It is the relation between the insured and the risk insured against such that the
occurrence of the risk will cause substantial loss or harm of some kind to the insured

Life and Health

 a. Of himself, of his spouse and of his children
b. Of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest
c. Of any person under a legal obligation to him for the payment of money, or
respecting property or services, of which death or illness might delay or prevent the
performance; and
d. Of any person upon whose life any estate or interest vested in him depends.

Property

a. An existing interest
b. An inchoate interest founded on an existing interest
c. An expectancy coupled with an existing interest in that out of which the expectancy
arises

4. Double Insurance
- Exists where the same person is insured by several insurers separately in respect to the
same subject and interest
5. Overinsurance
- Overinsurance exists where the value of the insurance exceeds the value of the
insurable interest

Overinsurance Results From Double Insurance: Rule

a. 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
b. 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
c. Where the policy under which the insured claims is an unvalued policy, any sum received by
him under any other policy shall be deducted against the full insurable value, for any sum
received by him under any policy
d. 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
e. 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.

6. Payment of Premiums
- Foundation of the contract of insurance

General Rule

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no
 policy or contract of insurance issued by an insurance company is valid and binding unless
and until the premium thereof has been paid. (77)

Exceptions

1. In the case of a life or an industrial life policy whenever the grace period applies
2. An acknowledgement in a policy or contract of insurance of the receipt of premium is
conclusive evidence of its payment (78)
3. If the parties have agreed to the payment in installments of the premium and partial
payment has been made at the time of loss
4. Insurer may grant credit extension
5. Estoppel.

7. Concealment and misrepresentation

Concealment
- a neglect to communicate that which a party knows and ought to communicate
- failure to disclose facts which the applicant at the time of application, knows or ought to
know and are material to the insurance applied for

Representation
- an oral or written statement of a material fact, made by the insured to the insurer
tending to induce the latter to assume the risk

Misrepresentation
- a false representation which the insured states with the knowledge that it is untrue,
intended to deceive the insurer into accepting the risk

Incontestability Clause
- a clause in a life or health insurance policy providing that after the policy has been in
force for a given length (e.g. 2 or 3 years) the insurer shall not be able to contest it as to
statements contained in the application

8. Suicide and accidental death

Suicide

The insurer in a life insurance contract shall be liable in case of suicide only when it is committed
after the policy has been in force for a period of 2 years from the date of its issue or of its last
reinstatement, unless the policy provides a shorter period. Provided, however, that suicide
committed in the state of insanity shall be compensated regardless of the date of commission.
(183)

Accidental Death

- Happen by chance or fortuitously, without intention or design, and are unexpected,

unusual and unforeseen
9. Averages
- Any extraordinary or accidental expense incurred during the voyage for the preservation
of the vessel, cargo, or both and all damages

General average

- A principle of customary law, independent of contract, whereby when it is decided by

the master of the vessel, acting for all the interests concerned, to sacrifice any part of a
venture exposed to a common and imminent peril in order to save the rest, the interest
so saved are compelled to contribute pro rata to the owner of the interests sacrificed
Elements
1. There must be a common danger
2. There must be a deliberate sacrifice of part of the vessel or of the cargo for the common safety
3. There must be a successful saving of the vessel or cargo
4. A proper legal steps and authority must have been taken.

Particular averages
- Include all damages and expenses caused to the vessel or to her cargo that have not
inured to the common benefit and profit of all the persons interested in the vessel and
her cargo

10. Warranties
- A statement or promise set forth in the policy, or by reference incorporated therein, the
untruth or non-fulfillment, of which in any respect, and without any reference to
whether the insurer was in fact prejudiced by such untruth or non fulfillment, renders
the policy voidable by the insurer, wholly irrespective of the materiality of such
statement or promise

Implied Warranties in Marine Insurance

1. Seaworthiness of the vessel

-reasonably fit to perform the service and to encounter the ordinary perils of the voyage
contemplated by the parties to the policy

2. Against Improper deviation

Deviation occurs in 3 ways:
a. A departure from the course of the voyage insured, as expressed in the preceding paragraph
b. An unreasonable delay in pursuing the voyage or
c. The commencement of an entirely different voyage

3. Proper documentation
- The ship will carry the requisite documents to show nationality or neutrality
4. Not to engage in an illegal venture
- Such as carrying out illegal trade or contraband

11. Subrogation
 - By subrogation, the insurer steps into the shoes of the insured and becomes entitled to
whatever the latter may claim from the third party responsible for the loss or damage to
the extent of what the insurer has paid

12. Suretyship
- 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

13. Freightage
- Signifies all the benefits derived by the owner either from 1) the chartering of the ship;
or 2) its employment for the carriage of his own goods or those of others