INSURANCE 501 AUG 23, 2018
a) Sec. 3. All rights, title and interest in
1. Recap. From history of insurance until the kinds
of insurance.
2. Who are the parties?
a) Insured – one who enters into a
contract with the insurer; he is the
owner of the policy
 Person who applied for and to
whom an insurance policy is issued
to cover his life, property or the life
of or property of other persons in
whose life or property he has
insurable interest or liability to
other persons
 Owner of the policy whose
property or life is insured or who
took out the insurance over the life
of persons in whom be has
insurable interest
b) Insurer – party who promises to pay in
case loss results because the peril
insured against occurred
3. Is a beneficiary a party to the insurance
contract? No, unless he is the insured.
4. Who is the assured? An assured is the person
who took out an insurance on the life of
another.
5. What is required of an insured? Capacity
 Contract is voidable if one of the parties is
incapacitated
i. Minor
ii. Insane
iii. Incapacitated to enter into an
insurance contract
6. If you are married and you get an insurance, do
you need the consent of your spouse? No if the
insurance is taken on the life of the children or
spouse.
 Sec. 3. The consent of the spouse is not
necessary for the validity of an insurance
policy taken out by a married person on his
or her life or. That of his or her children.
7. How about if the child is illegitimate? No
consent is necessary since the law does not
differentiate between legitimate and
illegitimate children.
8. If you insure a third person, do you need the
consent of your spouse? It depends:
a) If the funds are taken from the
exclusive property of the spouse, then
the consent of the other spouse is not
necessary.
b) If the funds are from the common
property of the spouses, then the
consent of the other spouse is
necessary.
9. What is the effect of the death of an owner?
the policy of insurance taken out by an
original owner on the life or health of
the person insured shall automatically
vest in the latter upon the death of the
original owner, unless otherwise
provided for in the policy.
b) Sec. 22. The interest if 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 if the
insurance.
i. The share forfeited shall pass
on to the other beneficiaries,
unless otherwise disqualified.
ii. In the absence of other
beneficiaries, the proceeds
shall be paid in accordance
with the policy contract.
iii. If the policy contract is silent,
the proceeds shall be paid to
the estate of the insured.
10. What is public enemy? A public enemy is a
State which is at war with the Philippines.
11. Is this limited to a state? No, it includes the
citizens of the State.
12. Can you get insurance? No.
 Sec. 7. Anyone except a public enemy may
be insured.
13. What happens to the insurance during a war?
The insurance policy is deemed abrogated.
a) United States Rule – The contract is not
merely suspended, but is abrogated by
reason of nonpayment of premiums,
since the time of the payments is
peculiarly of the essence of the
contract.
b) New York Rule – War between states in
which the parties reside suspends the
contract of life insurance and that,
upon tender of all premiums due by
the insured or his representative after
the war was terminated, the contract is
revived and becomes fully operative
14. Why do we apply the US rule in the
Philippines? The application of the New York
Rule would encourage wars since you can still
claim the insurance after the war.
15. Who is an insurer?
 Insurer shall include all partnerships,
associations, cooperatives or corporations,
including government-owned or controlled
corporations or entities, engaged as
principals in the insurance business,
excepting mutual benefit associations.
  Sec. 6. Every corporation, partnership, or
association, duly authorized to transact
insurance business as elsewhere provided
in this Code, may be an insurer.
16. What are the exceptions? Mutual benefit
associations
17. Can an individual be an insurer? No.
 Individuals are no longer identified as
persons who can be an insurer.
18. What is a mutual benefit association?
a) Not for profit
b) Mutual benefit of the members
c) Voluntary contributions which are not
regular
d) No fixed amount of contribution
 Sec. 404. Any society, association or
corporation, without capital stock, formed
or organized not for profit but mainly for
the purpose of paying sick benefits to
members, or of furnishing financial support
to members while out of employment, or
of paying to relatives of deceased members
of fixed or any sum of money, irrespective
of whether such aim or purpose is carried
out by means of fixed dues or assessments
collected regularly from the members, or of
providing, by the issuance of certificates of
insurance, payment of its members of
accident or life insurance benefits out of
such fixed and regular dues or
assessments, but in no case shall include
any society, association, or corporation
with such mutual benefit features and
which shall be carried out purely from
voluntary contributions collected not
regularly and/or no fixed amount from
whomsoever may contribute, shall be
known as a mutual benefit association.
19. Give an example of mutual benefit association.
Like a sinking fund
20. What is a professional reinsurer? A reinsurer
insures the risk taken by an insurer for and in
behalf of the insured. Insurer of the insurer.
a) Regular and fixed premiums
b) Insurer and insured are the members
 Sec. 288. xxx the term ‘professional insurer’
shall mean any entity that transacts solely
and exclusively reinsurance business in the
Philippines. xxx
21. Do you have to be a domestic company? No.
An insurer may be a domestic company or a
foreign company.
22. What is a domestic company?
 Sec. 190. xxx Domestic company shall
include companies formed, organized, or
existing under the laws of the Philippines.
xxx
23. What is a foreign company?
 Sec 190. xxx Foreign company when used
without limitation shall include companies
formed, organized, or existing under laws
other than those of the Philippines
24. What is a mutual insurance company? These
are domestic stock life insurance companies
doing business in the Philippines that
converted itself into an incorporated mutual
life insurer.
 Sec. 268. Any domestic stock life insurance
company doing business in the Philippines
may convert itself into an incorporated
mutual life insurer. To that end it may
provide and carry out a plan for the
acquisition of the outstanding shares of its
capital stock for the benefit of its
policyholders, or any class or classes of its
policyholders xxx
25. What is mutualization? Stock corporation
amends its articles of incorporation to be
converted into a non-stock corporation
wherein the members are benefited from their
contributions.
26. What is demutualization? Non-stock
corporation is converted into a stock
corporation.
27. What are the reasons for demutualization?
a) The need of the companies for more
funds
b) Enable the insurance company to
diversify its activities
c) Facilitate payment of certain types of
non-cash compensation to its directors
and officers
28. What is a cooperative?
 Art. 3 of RA 9520. A cooperative is an
autonomous and duly registered
association of persons, with a common
bond of interest, who have voluntarily
joined together to achieve their social,
economic, and cultural needs and
aspirations by making equitable
contributions to the capital required,
patronizing their products and services and
accepting a fair share of the risks and
benefits of the undertaking in accordance
with universally accepted cooperative
principles.
29. What provisions govern a cooperative? Articles
105-108 of RA 9520 or the Philippine
Cooperative Code of 2008.
 ART. 105. Cooperative Insurance Societies.
– Existing cooperatives may organize
 themselves into a cooperative insurance
entity for the purpose of engaging in the
business of insuring life and property of
cooperatives and their members.
 ART. 106. Types of Insurance Provided. –
Under the cooperative insurance program
established and formed by the virtue of the
provisions of this Code, the cooperative
insurance societies shall provide its
constituting members different types of
insurance coverage consisting of, but not
limited to, life insurance with special group
coverage, loan protection, retirement
plans, endowment, motor vehicle
coverage, bonding, crop and livestock
protection and equipment insurance.
 ART. 107. Applicability of Insurance Laws. –
The provisions of the Insurance Code and
all other laws and regulations relative to
the organization and operation of an
insurance company shall apply to
cooperative insurance entities organized
under this Code. The requirements on
capitalization, investments and reserves of
insurance firms may be liberally modified
upon consultation with the Authority and
the cooperative sector, but in no case may
be requirement to be reduced to less than
half of those provided for under the
Insurance Code and other related laws.
 ART. 108. Implementing Rules. – The
Insurance Commission and the Authority,
in consultation with the concerned
cooperative sector, shall issue the
appropriate rules and regulations
implementing the provisions of this
Chapter.
INSURANCE EH501 AUG 24, 2018
1. Recap. From parties until insurer.
2. May cooperatives become the insurer? Yes
 ART. 105. Cooperative Insurance Societies. –
Existing cooperatives may organize themselves
into a cooperative insurance entity for the
purpose of engaging in the business of insuring
life and property of cooperatives and their
members.
3. What provisions govern a cooperative? Articles 105-108
of RA 9520 or the Philippine Cooperative Code of 2008.
4. If you are a cooperative, can you engage in life and/or
property insurance or is it limited only to a particular
type? It can enter into life and property insurance.
 ART. 106. Types of Insurance Provided. – Under
the cooperative insurance program established
and formed by the virtue of the provisions of
this Code, the cooperative insurance societies
shall provide its constituting members different
types of insurance coverage consisting of, but
not limited to, life insurance with special group
coverage, loan protection, retirement plans,
endowment, motor vehicle coverage, bonding,
crop and livestock protection and equipment
insurance.
5. To whom is the insurance provided? Members
6. How is the insurance law applied when it comes to a
cooperative acting as insurer?
 ART. 107. Applicability of Insurance Laws. – The
provisions of the Insurance Code and all other
laws and regulations relative to the organization
and operation of an insurance company shall
apply to cooperative insurance entities
organized under this Code. The requirements on
capitalization, investments and reserves of
insurance firms may be liberally modified upon
consultation with the Authority and the
cooperative sector, but in no case may be
requirement to be reduced to less than half of
those provided for under the Insurance Code
and other related laws.
 ART. 108. Implementing Rules. – The Insurance
Commission and the Authority, in consultation
with the concerned cooperative sector, shall
issue the appropriate rules and regulations
implementing the provisions of this Chapter.
7. Are you aware of any cooperative insurance society?
Not very popular. Instead of forming a cooperative might
as well form a mutual benefit association.
8. What is the primary requirement for you to be
considered as an insurer? Certificate of Authority
 Certificate of Authority - grants the license to
enter into the insurance business
- issued by the
Insurance Commission
9. Why are you required to get Certificate of Authority?
Insurance is vested with public interest because it involves
soliciting money from the public. As such, it can be heavily
regulated with the State.
10. What are the requirements to get a Certificate of
Authority? It must possess the capital and assets required
of an insurance corporation doing the same kind of
business in the Philippines and invested in the same
manner.
 Section 192. No corporation, partnership, or
association of persons shall transact any
insurance business in the Philippines except as
agent of a corporation, partnership or
association authorized to do the business of
insurance in the Philippines, unless possessed of
the capital and assets required of an insurance
corporation doing the same kind of business in
the Philippines and invested in the same
manner; unless the Commissioner shall have
granted it a certificate to the effect that it has
complied with all the provisions of this Code.xxx
11. How much is the current minimum requirement for
capitalization? 550 Million as of Dec. 2016 subject to
continuing compliance of the requirements.
12. Certificate of Authority is valid for how many years? 3
years and renewable thereafter subject to continuing
compliance of the requirements.
 Sec. 193. xxx The certificate of authority issued
by the Commissioner shall expire on the last day
of December, three (3) years following its date
of issuance, and shall be renewable every three
(3) years thereafter, subject to the company’s
continuing compliance with the provisions of
this Code, circulars, instructions, rulings or
decisions of the Commission.xxx
13. What are the grounds for disqualification? Sec. 193
a) If such refusal will promote the interest of the
people in this country
b) If there is evidence tat the applicant company is
not qualified by the laws of the Philippines to
transact business therein;
c) If the grant of such authority appears to be
unjustified in the light of
i. Economic requirements
ii. Direction, administration, integrity and
responsibility of the organizers and
administrators
iii. Financial organization and the amount of
capital
iv. Reasonable assurance of safety of the
interests of the policyholders and the
public
d) The name of the applicant belongs to any other
known company transacting a similar business
in the Philippines or its name is so similar as to
be calculated to mislead the public.
14. What are the prohibited acts?
a) To transact in the Philippines the business of life
and non-life insurance concurrently, unless
specifically authorized to do so by the
Commissioner; (Sec. 193)
i. Reason: Capitalization requirement is
different and very high. There are only a
few who are both life and non-life
insurance companies.
b) To have equity in an adjustment company and
neither shall an adjustment company have
equity in an insurance company; (Sec. 370)
i. Adjustment companies - those which value
the loss
c) To negotiate any contract of insurance other
than is plainly expressed in the policy or other
written contract issued to or to be issued as
evidence thereof; (Sec. 370)
i. Reason: Could lead to unfair competition
d) To directly or indirectly, by giving or sharing a
commission or in any manner whatsoever, pay
or allow or offer to pay or allow to the insured
or to any employee of such insured, either as an
inducement to the making of such insurance or
after such insurance has been effected, any
rebate from the premium which is specified in
the policy, or any special favor or advantage in
the dividends or other benefits to accrue
thereon; (Sec. 370)
i. Reason: Rebates will tend to make the
insurance policy a commodity which will
lead to devaluation of the policy.If the
insurance policy becomes cheaper, then
the risk assumed by the insurer would be
too much such that the insurer may not be
able to pay the proceeds.
e) To give or offer to give any valuable
consideration or inducement of any kind,
directly or indirectly, which is not specified in
such policy or contract of insurance; (Sec. 370)
i. Example: I will give you a refrigerator if you
get a policy from me.
ii. Reason: Unfair competition
 iii. Insurance companies give the perks to their
agents and not to the insured.
f) To make any discrimination against any Filipino
in the sense that he is given less advantageous
rates, dividends or other policy conditions or
privileges than are accorded to other nationals
because of his race; (Sec. 370)
g) To issue or circulate or cause or permit to be
issued or circulated any literature, illustration,
circular or statement of any sort
misrepresenting the terms of any policy issued
by any insurance company of the benefits or
advantages promised thereby, or any misleading
estimate of the dividends or share of surplus to
be received thereon; (Sec. 371)
i. Agents give you different rates, that is, high
rate, medium rate and low rate.
h) To use any name or title of any policy or class of
policies misrepresenting the true nature
thereof; (Sec. 371)
i) To make any misleading representation or
incomplete comparison of policies to any person
insured in such company for the purpose of
inducing or tending to induce such person to
lapse, forfeit, or surrender his said insurance;
(Sec. 371)
i. Reason: Unfair Competition
j) To commit unsafe business practices or acts.
(I.C. Circular Letter No. 2017-59)
15. Is the list of prohibited acts exclusive? No.
16. Who is a beneficiary? A beneficiary is the one who will
receive the proceeds of an insurance contract.
17. Is a beneficiary a party to an insurance contract?
Generally, no.
INSURANCE EH501 8.30.2018
18. Recap. From “cooperatives as insurer” until “beneficiary
is not a party to the insurance contract.”
There is a catch-all provision in the Code which guides us
that the list of prohibited acts is not exclusive.
19. What is the rule of beneficiaries regarding life insurance
proceeds?
Beneficiaries will receive the proceeds of the life insurance
upon the death of the insured.
20. Is the beneficiary obliged to turn over the proceeds of
the insurance to the heirs of the insured?
No. The proceeds are the separate and individual property of
the beneficiary and not the heirs of the person whose life
was insured.
It’s more like a donation mortis causa which takes effect
after the death of the insured.
21. Is it a requirement that the beneficiary must have an
insurable interest over the insured in the life insurance
policy?
There are two scenarios:
a) A gets a life insurance, insured his life, and
appointed B as the beneficiary, is it necessary for
B to have insurable interest?
No. Because getting a life insurance and appointing a
beneficiary is akin to a donation mortis causa even if the
beneficiary has no insurable interest.
This is actually one way of avoiding taxation because life
insurance proceeds is exempt from income taxation.
Of course, it is a different story when it involves common or
conjugal funds wherein the consent of the other spouse is
necessary.
b) A gets a life insurance over the life of B, is it a
requisite for A, being the beneficiary, to have
insurable interest?
Yes. To avoid instances where the beneficiary would kill the
insured to get the proceeds.
22. What is insurable interest?
Insurable interest is that interest which a person is deemed
to have in the subject matter insured, where he has a
relation or connection with or concern in it, such that the
person will derive pecuniary benefit or advantage from the
preservation of the subject matter insured and will suffer
pecuniary loss or damage from its destruction, termination,
or injury by the happening of the event insured against.
23. What is the rule of beneficiaries regarding life insurance
proceeds?
a) The beneficiary will receive the proceeds of the life
insurance upon death of the insured.
b) If there are no other beneficiaries, the proceeds
shall be paid in accordance with the policy
contract.
c) If there are no other beneficiaries and there is no
provision in the policy contract, the proceeds shall
be paid to the estate of the insured.
24. What if the amount used to pay the premium comes
from the conjugal or common funds, what is the rule?
a) If there is a designated beneficiary, the beneficiary
is entitled to the proceeds of the policy.
 b) If there is no beneficiary designated, the proceeds
shall be paid in accordance with the policy
contract.
c) If there are no beneficiaries designated and no
provision in the policy contract, one-half of the
proceeds belong to the estate of the insured and
the other half to the surviving spouse.
25. What is the rule when it comes to the designation of
beneficiaries?
As a rule, the designation of the beneficiary is revocable.
If the insured wants the designation to be irrevocable, the
irrevocable nature should be expressly provided for in the
policy.
However, when the insured dies, then automatically, the
designation becomes irrevocable.
26. What is the provision under RA 10607 regarding
revocation during the lifetime?
Section 11. The insured shall have the right to
change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy.
Notwithstanding the foregoing, in the event the insured
does not change the beneficiary during his lifetime, the
designation shall be deemed irrevocable.
27. What are the instances where the rights of beneficiary
may be forfeited?
a) Beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death of
the insured.
b) Persons disqualified from receiving donations
under Art. 739.
i. Those made between persons who were
guilty of adultery or concubinage at the time
of the donation;
ii. Those made between persons found guilty of
the same criminal offense, in consideration
thereof;
iii. Those made to a public officer or his wife,
descendants and ascendants, by reason of his
office.
Conviction is not necessary in order for one to be disqualified
due to adultery or concubinage.
28. Will the prohibition on donations between spouses
apply here?
No. You can appoint spouse as beneficiary. The prohibition
on donations between spouses is found in the Family Code
not in Art. 739 of the civil code. Thus, the spouse can be a
beneficiary.
29. Can you appoint the following as beneficiaries?
a) Mistress - No
b) Illegitimate child - Yes
i. Whatever mistake the parents committed
does not pass to the child.
ii. Child comes from your own flesh, so there is
insurable interest.
30. Can you assign life insurance policy? Yes.
Section 184. A policy of insurance upon life or
health may pass by transfer, will or succession to any
person, whether he has an insurable interest or not, and
such person may recover upon it whatever the insured
might have recovered.
31. Is it required that you notify the insurer?
No. Since the right to transfer is conferred by law, notice to
the insurer is not even necessary to validate the transfer.
Nevertheless, while notice to the insurer is not required, it is
more advantageous to the assignee to give notice to the
insurer of such transfer.
32. What is the rule on double assignment?
a) English Rule - assignee who first gives notice is the
one entitled to the proceeds if he has no notice of
any prior assignment
b) American Rule - assignee under the first
assignment has the preferable claim
We adhere to the American Rule because in the absence of
any specific provision on double sale or assignment, the
applicable principle is prius tempore portior jure (“first in
time, stronger in right”).
33. In non-life or property insurance, is it necessary that the
beneficiary must have insurable interest?
Yes. This is because you can only suffer pecuniary loss if you
own or have an interest in the property.
34. When must insurable interest exist?
Insurable interest must exist not only during the time of
perfection of the contract of insurance but also during the
time of loss.
35. What does assignment of insurance policy imply?
It is as if the insured passes the ownership of the policy to
the assignee so it is now the assignee who pays the
premium.
36. Can you assign property insurance?
Yes. There must be notice and consent of the insurer and the
assignee must have insurable interest.
37. Why do you need the consent of the insurer?
The insurer needs to ascertain whether the assignee has
insurable interest.
38. If I sell the insured house, does that mean that the
policy will automatically be transferred to the buyer?
No. The consent of the insurer is necessary to transfer the
policy. The transferee must also have an insurable interest
over the property transferred.
39. What are the effects of irrevocable designation of a
beneficiary?
a) The insured cannot assign the policy to someone
else.
b) The insured cannot get the cash surrender value of
the policy.
c) The insured cannot add a new beneficiary.
d) The insured cannot change the irrevocable
designation to revocable even if the change is just
and equitable.
e) Creditors of the insured cannot attach the
proceeds of the insurance.
40. Who are insurance agents and brokers?
a) Insurance agent is any person who for
compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a
person other than himself an application for a
policy or contract of insurance to or from such
company or offers or assumes to act in the
negotiating of such insurance.
b) Insurance broker is any person who for any
compensation, commission or other thing of value
acts or aids in any manner in soliciting, negotiating
or procuring the making of any insurance contract
or in placing risk or taking out insurance, on behalf
of an insured other than himself.
While the insurer agent normally represents the insurer, the
insurance broker acts for and in behalf of the insured.
41. Can an insurance agent bind the insurer?
Yes. The agents can bind the insurer provided they act within
their authority. Insurance agents are governed by the New
Civil Code provisions on Agency.
42. Can I become an insurance agent for free without
receiving any compensation?
No. In one case, the SC declared that an insurance agent
must perform his function for compensation. However, the
compensation need not be regular, it can be on commission
basis.
43. Is the insurance agent governed by the Insurance Code?
No. The Insurance Code does not have provisions governing
the relations between insurance companies and their agents.
If there is an issue regarding the relations between the
insurance agents and the insurer, the Labor Code will apply if
there is employer-employee relationship, otherwise, the Civil
Code will apply for independent contractors.
However, in matters of regulations, the Insurance Code will
apply. Insurance agents and brokers are under the regulatory
powers of the Insurance Commissioner.
INSURANCE EH501 9.6.2018 [JCV]
1. Recap. From “beneficiary” to “insurance agents.”
2. What is insurable interest?
Insurable interest is that interest which a person is deemed
to have in the subject matter insured, where he has a
relation or connection with or concern in it, such that the
person will derive pecuniary benefit or advantage from the
preservation of the subject matter insured and will suffer
pecuniary loss or damage from its destruction, termination,
or injury by the happening of the event insured against.
3. When do you have insurable interest if it is life
insurance?
Sec. 10. Every person has an insurable interest in the life
and health:
(a) Of himself, of his spouse and 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.
4. What are the instances when you can have an insurable
interest over the life of other persons?
a) Blood relationship
b) Business relationship
c) Other pecuniary interest
5. Is relationship by affinity included?
No. The insurable interest under Sec. 10(a) refers to a
relationship by blood. The blood relationship is limited to the
insurable interest over the life of a spouse or of one’s
children.
6. What is the requisite for Sec. 10 (b)?
One has insurable interest on the life of any person on whom
he depends wholly or in part for education or support or in
whom he has a pecuniary interest.
The law does not require that the person on whom one
depends wholly or in part for education or support is legally
obliged to do so.
It is enough if there is a reasonable certainty that the
continuation of the life will be direct, material advantage to
the insured.
7. For example, your uncle who is residing abroad pays for
your education, do you have insurable interest?
Yes, because the educational support will be discontinued
upon the death of the uncle.
8. What does Sec. 10(c) mean?
A creditor shall have insurable interest over the life of the
debtor who may be obligated to deliver money or property
or to provide some service.
However, the debtor cannot insure the life of the creditor
because he will not be damnified by the loss of the creditor’s
life.
9. Is there an insurable interest in a partnership?
Yes. One has insurable interest over the life of his partner. It
is reasonable to conclude that the continuance of
partnership and the life of a partner furnished a reasonable
expectation of advantage to the other partners.
10. How about a mortgagor and mortagee?
Both the mortagor and the mortgagee have insurable
interest over the mortgaged property.
11. Is there an insurable interest when there is an
employer-employee relationship?
Yes. A company has insurable interest in the life of its officers
or employees. The loss of the life of the employee, officer, or
director will result in economic loss on the part of the
employer or the corporation because he will be deprived of
the service of the employee.
This is why employers get a group insurance policy for their
employees.
12. What will happen in a mortgage redemption insurance?
While it is true that a creditor can insure the life of the
debtor, the latter, on the other hand, cannot insure the life
of the creditor for lack of insurable interest.
The exception to this rule is the mortgage redemption
insurance. In this type of insurance, when the mortgagor
dies, the proceeds from the insurance will be applied to the
debt of the mortgagor. The insurer will now be subrogated to
the rights of the mortgagee up to the extent of the
indemnity that the insurer paid to the mortgagee. On the
part of the mortgagor, the mortgage obligation would be
extinguished by the application of the insurance proceeds.
13. What is the “loss payable clause”?
Under this clause, any action of the mortgagor will affect the
mortgagee.
14. When should the insurable interest in life insurance
exist?
Insurable interest should exist at the time of the effectivity of
the life insurance. It need not exist at the time when the loss
will occur.
Sec. 19. xxx 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.
15. Can you get a life insurance over the life of your brother
or sister?
Yes, for education or support under Sec. 10(b).
16. Is there a limit to the amount with respect to life
insurance?
Generally, there is no limit because there is no specific
valuation on the life of a person.
The exception is in the case of a creditor and debtor.
The insurable interest of the creditor over the life of the
debtor is limited only to the value of the debt. When the
debtor dies and the creditor has already collected the debt,
he can no longer collect beyond that since his pecuniary
interest is already satisfied.
17. What is the rule when it comes to insurable interest
over the property?
Sec. 13. Every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the
insured, is an insurable interest.
18. When can you say that you have an insurable interest
over the property?
Sec. 14. An insurable interest in property may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing contract; or
(c) An expectancy coupled with an existing interest in that
out of which the expectancy arises.
19. What do you mean by existing interest?
Insurable interest in property exists in any of the following
cases because the person is so situated that he will suffer
because of the loss due to a peril insured against:
a) When the insured possesses a legal title to the
property insured, whether vested or contingent,
defeasible or indefeasible;
b) When he has equitable title of whatever character
and in whatever manner acquired;
c) When he possesses a qualified property or
possessory right in the subject of the insurance;
d) When he has mere possession or right of
possession; and
e) When he has neither possession of the property
nor any other legal interest in it but stands in such
relation with respect to it that he may suffer from
its destruction, loss of a legal right dependent
upon its continued existence.
20. Give an example.
a) Lessee
b) Depositary
c) Usfructuary
 d) Borrower in commodatum It is limited to the extent of the value of the property by
which the insured will suffer loss or injury.
Here, the insurable interest exists only during the life of the
contract. 29. In sum, differentiate the insurable interest in a life and
property insurance.
21. Who is a borrower in commodatum?
A borrower in commodatum is one who is obliged to return
the exact thing borrowed and not merely its equivalent. Insurable
Life Property
Interest
22. When does the insurable interest exist in that
transaction? 1. As to Unlimited except if Limited up to
The insurable interest of a borrower in commodatum exists extent secured by the the value of the
only when the property is under the possession of such creditor. property.
borrower. Once the property is returned, there is no longer
2. Time At the time of
any insurable interest over the property. At the time of
when it perfection of the
perfection of the
23. What is the rule when it comes to unpaid seller in sale must exist contract and at
insurance contract.
of goods? the time of loss.
In sale of goods, an unpaid seller retains insurable interest 3. Need Expectation of
over the goods even if ownership had already been for Legal benefit need not
transferred to the vendee upon delivery. Basis have legal basis or Expectation of
An unpaid seller has a vendor’s lien and therefore he will be need not be based benefit must
damnified by the loss of the goods even after delivery. on legally have legal basis.
enforceable
24. Does the buyer have an insurable interest over goods in obligation.
transit?
4. Interest Insurable interest is
Yes, the vendee or buyer has insurable interest over the of not necessary of the
goods even while the goods are still in transit. Beneficiary insured took out the
His interest over the goods is based on the perfected policy on his own life
contract of sale which vests in him an equitable title even and designated Beneficiary must
before delivery or before he performed the conditions of the another. have insurable
sale. interest.
Beneficiary must
25. Does F.O.B. shipping point or F.O.B. destination matter? have insurable
interest if one took
No, in the insurance code, it will not matter. For goods in
out an insurance on
transit, both the buyer and seller can insure them.
the life of another.
The contract of shipment, whether under “F.O.B.,” “C.I.F.,”
or “C &F” is immaterial in the determination of whether the
vendee has insurable interest or not in the goods in transit. 30. What is the rule on the insurable interest of a carrier or
The perfected contract of sale even without delivery vests depositary?
the vendee an equitable title, an existing contract over the Sec. 15. A carrier or depositary of any kind has an insurable
goods. interest in a thing held by him as such, to the extent of his
26. How about inchoate interest? liability but not to exceed the value thereof.

Inchoate interest must be founded on an existing interest. 31. What is the rule for a mortgagor and mortgagee?

For example, a shareholder has inchoate interest over the
properties of the corporation.
His inchoate interest over the properties of the corporation
is founded on his existing interest in the corporation as a
shareholder.
27. How about expectancy?
Expectancy must likewise be coupled with an existing
interest.
Examples include the interest over the profits that are to be
earned by a business establishment, interest over future
crops of farmers, and expected commission of agents.
28. What is the rule when it comes to the amount in
insurance over the property?
Both the mortagor and the mortgagee have insurable
interest over the mortgaged property as long as the
mortgage exists.
Sec. 8. Unless the policy otherwise provides, where
a mortgagor of property effects insurance in his own
name providing that the loss shall be payable to the
mortgagee, or assigns a policy of insurance to a
mortgagee, the insurance is deemed to be upon the
interest of the mortgagor, who does not cease to be a
party to the original contract, and any act of his, prior to
the loss, which would otherwise avoid the insurance,
will have the same effect, although the property is in the
hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the
mortgagor, may be performed by the mortgagee
 therein named, with the same effect as if it had been
performed by the mortgagor.
As to the mortgaged property, the mortgagor and the
mortgagee have each an independent insurable interest and
both interests may be covered by one policy, or each may
take out a separate policy covering his interest, either at the
same or at separate times.
The mortgagor’s insurable interest covers the full value of
the mortgaged property.
The mortgagee’s insurable interest is to the extent of the
debt, since the property is relied upon as security thereof,
and he is not insuring the property but his interest or lien
thereon. His insurable interest is prima facie the value
mortgaged and extends only to the amount of the debt, not
exceeding the value of the mortgaged property.
32. How about lessor in a lessor-lessee relationship?
Both the financial lessor and the lessee in a financial lease
have insurable interest over the property that is the object of
the lease.
33. Does the lessor have insurable interest over properties
stored in the leased premises? Even if there is a provision
for automatic assignment of the policy?
No, the lessor has insurable interest only over the property
leased but not those stored in the leased premises.
34. What is the concept of standard or union mortgage
clause and open or loss payable mortgage clause?
a) Standard or union mortgage clause - create
collateral independent contracts between the
insurer and mortgagee, and provide that the rights
of a mortgagee shall not be defeated by the acts of
or defaults of the mortgagor.
The mortgagee’s rights remain unaffected by any
default or breach of condition by the mortgagor to
which the mortgagee is not a party.
b) Open or loss payable mortgage clause - merely
designate the mortgagee as payee, to the extent
of his interest, of such sum as may become
payable under the provisions and conditions of the
policy.
The mortgagee is made merely a beneficiary but
not made a party to the contract itself.
Any default on the part of the mortgagor, which by
the terms of the policy defeat his rights, will also
defeat all rights of the mrotgagee under the
contract, even though the latter may not have
been in any fault.
35. If silent, which clause will be presumed?
Open or loss payable clause.
36. What is the rule on assignment of life and property
insurance?
a) Assignment of Life Insurance - Life insurance can
be transferred even without the consent of or
notice to the insurer.
Sec. 184. A policy of insurance upon life or
health may pass by transfer, will or succession to
any person, whether he has an insurable interest
or not, and such person may recover upon it
whatever the insured might have recovered.
b) Assignment of Property Insurance - It is necessary
that the transferee has insurable interest over the
thing insured.
Section 18. No contract or policy of insurance
on property shall be enforceable except for the
benefit of some person having an insurable
interest in the property insured.
Section 58. The mere transfer of a thing
insured does not transfer the policy, but suspends
it until the same person becomes the owner of
both the policy and the thing insured.
37. In property insurance, what if there is an agreement
providing for the automatic assignment of the policy to the
assignee?
A clause in an agreement, providing for an automatic
assignment of the policy is void, if the assignee does not
have any insurable interest over the insured property.
Sec. 85. An agreement not to transfer the claim of
the insured against the insurer after the loss has
happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
38. What is premium?
Premium is the consideration paid to an insurer for
undertaking to indemnify the insured against the specified
peril.
39. What is the basis for premium?
The basis is the assumption of the risk.
40. What is the general rule when it comes to the payment
of premium?
The premium should be paid as soon as the thing insured is
exposed to the peril insured against.
41. Is the policy valid and binding without payment of
premium?
No. The policy is not valid and binding unless the premiums
have been paid.
42. Can they agree that the policy be valid and binding even
if there is no payment of premium?
Generally, no.
43. What are the exceptions?
a) When the grace period applies in case of life and
industrial life policy;
b) When there is an acknowledgment in the policy or
receipt that the premium has been paid;
c) When there is an agreement that the premium
shall be payable on installment;
d) When there is a credit extension; and
e) When the equitable doctrine of estoppel applies.
44. May insured demand the return of the premium?
Yes. The insured can ask for the return of the premium if the Papers Attached to the Policy
property was not exposed to the risk insured against. (Sec.
80(a)) 1. Riders
45. Will it be subject to income tax? 2. Clauses
No, the premiums recovered will not be subject to income
3. Endorsements
tax. It is a return of capital and not a return on capital so
there is no income to speak of.
46. What are the other instances when whole amount is
Rider - endorsement to a life insurance policy that modifies
recovered?
clauses and provisions of the policy, including or excluding
a) When the contract is voidable and subsequently coverages
annulled under the provisions of the Civil Code;
b) When the contract is annulled on account of the
fraud or misrepresentation of the insurer, or of his In case of conflict between a rider and the printed
agent, or on account of facts, or the existence of stipulations in the policy, the rider prevails since it is a more
which the insured was ignorant without his fault; deliberate expression of the agreement of contracting
or parties.
c) When by default of the insured other than actual
fraud, the insurer never incurred liability under the
policy. (Sec. 82) Clause - agreement between the insurer and the insured
47. How about pro rata recovery? over a certain matter pertaining to liability of the insurer in
case of loss
a) “Time policy” when the policy is surrendered
before the expiration of the stipulated time
Sec. 80(b) xxx to such portion of the premium as
Endorsement - written agreement attached to a property
corresponds with the unexpired time, at a pro rata rate,
insurance policy to add or subtract insurance coverages
unless a short period rate has been agreed upon and
appears on the face of the policy xxx
b) When there is over insurance by several insurers
Requisites to be Binding
(Sec. 83)
Sec. 83. In case of an over insurance by several insurers, A rider, clause, warranty or endorsement that are not part of
the insured is entitled to a ratable return of the the original printed form are binding provided that: (Sec. 50)
premium, proportioned to the amount by which the
1. The rider, clause, warranty or endorsement is
aggregate sum insured in all the policies exceeds the
insurable value of the thing at risk. attached to the policy;

INSURANCE 501 09.14.2018 [JCV]

2. The descriptive title or name of the rider, clause,
warranty or endorsement is mentioned and written on
Policy - the written instrument in which a contract of the blank spaces provided in the original printed policy
insurance is set forth (Sec. 49) form; and

Contents of a Policy [R2AP2ID] (Sec. 51) 3. If not applied for by the insured or owner, the rider,
1. Risk insured against clause, warranty or endorsement shall be
countersigned by the insurer.
2. Rate of premium

3. Amount of Insurance, except in open or running policies

Kinds of Property Insurance Policies
4. Parties
1. Open Policy
5. Property or life insured
2. Valued Policy
6. Interest of the insured in the property if he is not the
absolute owner 3. Running Policy

7. Duration of the insurance

If silent, assume that it is open policy. property to be considered is the actual value of P2.4 Million.
Since the total amount of the insurance coverage is less than
the actual loss, Fortune may recover P400,000 from X,
Open Policy P200,000 from Y and P600,000 from Z or a total amount of
P1.2 Million.
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
3. If each of the fire insurance policies obtained by Fortune in
thing insured shall be ascertained at the time of the loss. (Sec.
problem (2) is a valued policy and the value of his house was
60)
fixed in each policies at P1 Million, how much would Fortune
recover from X if he has already obtained full payment from
Valued Policy
the insurance policies issued by Y and Z?
A valued policy is one which expresses on its face an
agreement that the thing insured shall be valued at a specific
sum.(Sec. 61) Fortune can only recover P200,000 from X. The valuation of
the property (in this case P1 Million) is binding on the parties
Running Policy and it is no longer necessary to determine the actual value
thereof. The valuation in the policy is deemed the actual
A running policy is one which contemplates successive
value of the property.
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
4. Supposing in problem (1), Fortune was able to collect from
indorsements. (Sec. 62)
both Y and Z, may he keep the entire amount he was able to
collect from the said two insurance companies?
Exercise p.168-169

1. Suppose that Fortune owns a house valued at P600,000

No. Fortune may not keep the amount that he collected from
and insured the same against fire with three insurance
Y and Z. In problem (1), the total value of the property was
companies as follows:
P600,000, hence, if he collected P200,000 from Y and
X - P400,000 P600,000 from Z, there is an excess of P200,000. Fortune can
only be indemnified for his loss. Fortune must hold the
Y - P200,000
excess amount of his insurable interest in the house,
Z - P600,000 P200,000, in trust for the insurers Y and Z.

In the absence of any stipulation in the policies, from which

insurance company or companies may Fortune recover in
5. In problem (1) what is the extent of the liability of the
case the fire should destroy his house completely?
insurance companies among themselves?

Fortune may recover from any, any 2 or all of the insurers,

Each insurer is bound to contribute ratably to the loss in
provided that the total amount that he will recover does not
proportion to the amount for which he is liable under his
exceed his loss. Fortune may demand indemnity from Z
contract. The ratable contribution of each insurer will be
alone for P600,000. In the alternative, Fortune may recover
determined based on the following formula:
from all insurers P200,000 each. Fortune may also opt to
recover P400,000 from X and recover the balance from any
or both Y or Z.
AmountofPolicy
ExtentofLiability   ActualLoss
TotalInsuranceTaken
400,000
X   600,000  P 200,000
2. If each of the policies obtained by Fortune in problem (1) 1,200,000
is an open policy and it was immediately determined after 200,000
Y  600,000  P100,000
the fire that the value of the house was P2.4 Million, how 1,200,000
600,000
much may he collect from X, Y, and Z? Z  600,000  P300,000
1,200,000

Fortune may recover the full amount of the coverage from

each insurer if all policies are open policies. The value of the
Using the formula, the extent of the liability of each insurer
out of the total loss of P600,000 are as follows: X is P200,000,
Y is P100,000 and Z is P300,000.
Principle of Indemnification
You can only be indemnified to the extent of the value of the
loss.
INSURANCE EH501 9.20.2018 [JCV]
1. What is a cover note?
Cover notes are interim or preparatory contracts of
insurance. An interim coverage may be necessary because
the insurer may need more time to process the insurance
application.
2. What is the primary purpose of a cover note?
It is intended to give temporary insurance protection
coverage to the applicant pending acceptance or rejection of
his application.
3. When you receive a cover note, is there a perfected
contract of insurance?
No. The issuance of the policy is still pending approval.
4. What is validity of a cover note?
Cover notes are valid for 60 days from the date of its
issuance.
5. Can it be extended?
Yes. Cover notes may be extended or renewed beyond such
60 days with the written approval of the Commissioner if he
determines that such extension is not contrary to and is not
for the purpose of violating any provisions of this Code. Xxx
(SEC. 52, PAR. 2)
xxx The Commissioner may promulgate rules and regulations
governing such extensions for the purpose of preventing
such violations and may by such rules and regulations
dispense with the requirement of written approval by him in
the case of extension in compliance with such rules and
regulations. (SEC. 52, PAR. 2)
6. What are the requisites for the validity of cover notes?
a) The Cover Note shall be issued or renewed only
upon prior approval of the Insurance Commission;
b) The Cover Note shall be valid and binding not
more than 60 days from the date of its issuance;
c) The Cover Note may be cancelled by either party
upon prior notice to the other of at least 7 days;
d) The policy should be issued within 60 days after
the issuance of the cover note; and
e) The 60-day period may be extended upon written
approval of the Insurance Commission.
7. Why do you need the approval of the Insurance
Commissioner?
Cover notes must be regulated, otherwise it will be used as a
marketing tool.
8. Can there be temporary insurance protection?
Yes. It is in the form of cover notes. There is a presumption
and after 60 days there must be a declaration of whether or
not the policy will be issued.
Cover notes may be issued to bind insurance temporarily
pending the issuance of the policy. Within 60 days after the
issue of the cover note, a policy shall be issued in lieu
thereof, including within its terms the identical insurance
bound under the cover note and the premium therefor. xxx
(SEC. 52, PAR. 1)
9. Do you need to pay separate premium for the cover
note?
No separate premium, separate from the policy or main
contract, is required for the cover note since there is still no
perfected contract of insurance. The issuance of the policy is
still pending.
13. May insured cancel the policy?

10. Can a policy be cancelled? Yes.

Yes. The right to surrender the policy is implicit in Sec. 80 of
the Insurance Code wherein the insured is entitled to the
return of the premium.
SEC. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice thereof to
the insured, and no notice of cancellation shall be effective
14. What will happen if the insured cancels the policy?
unless it is based on the occurrence, after the effective date
of the policy, of one or more of the following:

(Grounds) The insured can get the cash surrender value of the policy.
a) Nonpayment of premium;

b) Conviction of a crime arising out of acts increasing 15. When is the time to commence an action on the policy?
the hazard insured against;

c) Discovery of fraud or material misrepresentation;

The action can be commenced from a period of 1 year from
d) Discovery of willful or reckless acts or ommissions the time the cause of action accrues.
increasing the hazard insured against;

e) Physical changes in the property insured which

result in the property becoming uninsurable; 16. Can it be shortened to 6 months?

f) Discovery of other insurance coverage that makes

the total insurance in excess of the value of the
No. A condition, stipulation, or agreement in any policy of
property insured; or
insurance, limiting the time for commencing an action
g) A determination by the Commissioner that the thereunder to a period of less than one (1) year from the
continuation of the policy would violate or would time when the cause of action accrues, is void. (SEC. 63)
place the insurer in violation of this Code.

17. Can it be extended to 2 years?

11. What are the requisites of cancellation?

a) Prior notice of cancellation to insured;

Yes. That is allowed because it is beneficial to the insured.
b) The notice of cancellation must be based on the
occurrence after effective date of the policy of one
or more of the grounds mentioned in Section 64; 18. May the insured renew a non-life insurance policy?

c) The notice must be in writing, mailed or delivered

to the named insured at the address shown in the
policy or to his broker provided the broker is Yes. A non-life insurance can be renewed since it is usually
authorized in writing by the policy owner to limited in time.
receive the notice of cancellation on his behalf;

d) The notice must state the grounds relied upon 19. Can you renew life insurance?
provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which
cancellation is based.
No. A life insurance cannot be renewed since what you are
insuring is death.

12. In this case, who cancels the policy?

20. What are the requisites for renewal or non-renewal?

The insurer has the right to cancel the policy under Sec. 64. a) Renewal
 i. Insured pays the premium due on the As a general rule, mistake does not automatically cause the
effective date of the renewal nullification of the policy. Exceptions include fraud.

b) Non-renewal

i. Insurer, at least 45 days prior to the 25. When there is mistake, does it automatically lead to the
expiration of the policy, gives notice of its reformation of the contract?
intention not to renew the policy or

ii. condition its renewal upon reduction of limits

No. Reformation is not necessary when the mistake is
or elimination of coverages
apparent or obvious and it does not change the content of
the contract.

SEC 66. In case of insurance other than life, unless the INSURANCE EH501 9.27.2018 [JCV]
insurer at least forty-five (45) days in advance of the end of
the policy period mails or delivers to the named insured at
the address shown in the policy notice of its intention not to 1. What are the devises to ascertain and control risks?
renew the policy or to condition its renewal upon reduction
of limits or elimination of coverages, the named insured shall a) Concealment
be entitled to renew the policy upon payment of the
b) Representation
premium due on the effective date of the renewal. Any
policy written for a term of less than one (1) year shall be c) Warranty
considered as if written for a term of one (1) year. Any policy
written for a term longer than one (1) year or any policy with d) Condition
no fixed expiration date shall be considered as if written for e) Exceptions
successive policy periods or terms of one (1) year.

2. What is concealment?
21. How many days notice is required?

Concealment is the neglect to communicate that which a

There must be notice at least 45 days prior to the expiration party knows and ought to communicate.
of the policy.

3. What are the requisites of concealment?

22. What are the requisites for reformation of the policy?

a) It must clearly appear that the contract failed to

express the real agreement between the parties; a) The party involved must know the fact concealed
and or at least he ought to know the same;

b) Proof must be of satisfactory character. b) The fact concealed must be material;

c) No warranty is extended by the party regarding

the fact concealed; and
23. What is reformation of contract?
d) The other party does not have the means of
ascertaining.
Reformation is that remedy in equity by means of which a
written instrument is made or construed so as to express or
conform to the real intention of the parties when some error 4. How do you know if the information is material?
or mistake has been committed.

SEC. 31. Materiality is to be determined not by the event, but

24. When there is mistake, does it automatically cause the solely by the probable and reasonable influence of the facts
nullification of the policy? upon the party to whom the communication is due, in
forming his estimate of the disadvantages of the proposed
contract, or in making his inquiries. (Test of Materiality)
5. What is the consequence of failure to disclose material Florendo v. Philam Plans, Inc., GR 186983
information?
The wife who is the beneficiary cannot claim the life
insurance proceeds of her husband since he failed to disclose
the fact that he has been taking medicine for his heart
The other party can rescind the policy on the ground of
condition and diabetes and that he had a pacemaker implant
concealment.
about 20 years before he signed the application.

6. If there is concealment, what type of contract exists?

12. Why is Sec. 110 of the Insurance Code an exception?
Rescissible contract.

This is an exception since it refers to a belief.

7. What are the exceptions?

a) Incontestability Clause
SEC. 110. In marine insurance, information of the belief or
b) Judgment or opinion
expectation of a third person, in reference to a material fact,
c) Sec. 110 of the Insurance Code is material.

8. What is incontestability clause? 13. Is good faith or unintentional concealment a defense in

concealment? No.

The policy shall be incontestable after it shall have been in

force during the lifetime of the insured for 2 years from the SEC. 27. A concealment whether intentional or unintentional
date of its issuance as shown in the policy, or date of entitles the injured party to rescind a contract of insurance.
approval of last reinstatement.

14. Give an example of concealment.

9. What is the purpose of the incontestability clause?

a) Concealment of the insured in life insurance of

The incontestability clause is intended to ensure timely fainting spells and/or drug overdoes illness
investigation or examination by the insurer. The insurer
b) Insured’s failure to disclose in an application for
cannot later deny the existence of the policy to the
automobile insurance that he does not have a
detriment of the insured who, all this time, thought the
driver’s license or that his license was revoked or
policy existed.
suspended

10. Why is judgment or opinion an exception?

15. Can the insurer invoke the defense of material
concealment even if the insured died due to causes other
than the medical condition concealed?
The insurer is not justified in relying upon the judgment or
opinion of the insured but is obligated to make furhter
inquiry.
Yes. The insurer can deny the claim on the ground of
material concealment although the insured died due to
causes other than the medical condition concealed.
The duty of disclosure requires that the statement made by
one party relate to facts and not to opinion. However, there
must be good faith and there must be no intent to deceive.
16. What happens in misrepresentation?

11. Cite a case where there was concealment.

SEC. 44. A representation is to be deemed false when the
facts fail to correspond with its assertions or stipulations.
17. What is the purpose of misrepresentation? 23. Can you take back your misrepresentation? Yes.

Representations are statements made to give information to 24. When should withdrawing the misrepresentation
the insurer to induce him to enter into the insurance happen?
contract.

The misrepresentation should be withdrawn at the time of or

18. What are the requisites of misrepresentation? before the issuance of the policy. Otherwise, if such is
withdrawn after the effectivity of the policy, then it is
considered a misrepresentation which is a ground for the
a) The insured stated a fact which is untrue; rescission of the contract.

b) Such fact was stated with knowledge that it is

untrue and will inted to deceive or which states
25. Can the insured also invoke the ground of
positively as true without knowing it to be true
misrepresentation?
and which has the tendency to mislead; and

c) Such fact is material to the risk.

Yes. In the topic of cancellation, the insured can cancel the
policy even without cause. While, the insurer must provide
19. What is the rule on materiality of a representation? grounds for cancellation, as well as notice to the insured.

SEC. 46. The materiality of a representation is determined by 26. Case of Insular Life
the same rules as the materiality of a concealment

Insular Life Assurance Co. Ltd. v. Feliciano GR L-47593

20. Could this cover facts which are not essential to the
contract?
Yes, even if the misrepresentation is only intended for
inducement.
When the insured signed the application in blank and
authorized the soliciting agent and/or medical examiner of
the Company to write the answers for him, he made them
his own agents for that purpose, and he was responsible for
their acts in that connection. If they falsified the answers for
him, he could not evade the responsibility for the
falsification.

21. What are the forms of representation?

~~~Not sure if mao ni nga case ang pasabot ni Atty. :)

a) Oral

b) Written

22. What are the kinds of representation?

a) Affirmative Representation - involve statements

dealing with facts existing at the time the contract
is made

b) Promissory Representation - statements made by

the insured concerning what is to happen at the
time the insurance is already effective