Under the Insurance Code, Life insurance is an insurance on human lives,

appertaining thereto or connected therewith (Sec. 181). Life insurance covers

benefits recoverable because of the happening of the actual death, or when
insured suffered permanent disability and when insured survives even beyond the
period of earning capacity. Life insurance benefits may be claimed in advance prior
to the insured’s actual death.
Every contract or undertaking for the payment of annuities including contracts for
the payment of lump sums under a retirement program where a life insurance
company manages or acts as a trustee for such retirement program shall be
considered a life insurance contract for purposes of the Insurance Code.
Life insurance which is a contract upon a condition rather than a contract to
indemnify for nor recovery can fully repay a beneficiary for the loss of life which is
beyond pecuniary value.
An insurance contract is an aleatory contract, meaning that, that it depends upon
some form of a contingent event.
A Contingent event is the happening of an event which is uncertain, or which is to
occur at an indeterminate future time.
Under Section 3 of the insurance code: “Any contingent or unknown event,
whether past or future, which may damnify a person having an insurable interest,
or create a liability against him, may be insured against…”
In the case of Life insurance the contingent event would be either the death, the
ailment or the injury of the insured.
Life insurance assumes to safeguard the insured’s life, estate, family, creditors or
others who may be qualified against pecuniary loss which may be a consequence
from the death of the insured. It also encompasses the loss of earning capabilities
by a person resulting from his death, injury, illness, old age which can also be a
subject matter thereof.
Section 180 of the insurance code defines Life insurance as “An insurance upon life
may be made payable on the death of the person, or on his surviving a specified
period, or otherwise contingently on the continuance or cessation of life”. A
subject matter in the purview of insurance refers to the thing insured. Thus, in life
insurance the subject matter is the life of the insured himself and contingently on
the continuance, prolongation or termination of life.
For insurable interest in life, there is reasonable ground to expect that one who
takes out insurance over the life of another stands to benefit from its continuation
and is not interested in his early death.
Insurable interest is one the most basic of all requirements in insurance. In
general, a person is deemed to have insurable interest in the subject matter
insured where he has a relation or connection with or concern in it that he will
derive pecuniary benefit or advantage from its preservation and will suffer
pecuniary loss or damage from its destruction, termination or injury by the
happening of the event insured against.
Insurable interest is essential for validity and enforceability of the contract or
policy. A policy issued to a person without interest in the subject matter is a mere
wager policy or contract.
In life insurance, Insurable interest exists where there is reasonable ground
founded on the relations of the parties whether pecuniary, contractual or by blood
or affinity, and to expect some benefit or advantage from the continuance of the
life of the insured.
In life insurance, insurable interest may be; the insurable interest in the insured’s
own life or in the life of another person.
The persons in whose life one may have insurable interest are enumerated in
section 10 of the insurance code which provides:

Every person has an insurable interest in the 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.
Under the Insurance Code, Life Insurance can be classified into:
A. Whole Life Insurance – This kind of insurance covers the life of a
person permanently or for his whole life. It can also be subdivided
depending on the manner in which a person pays his premium and
these are:

1.) Single Premium – The person pays the premium in one setting or
transaction.
2.) Continuous Premium – The person pays the premium in different
settings, or in a staggered basis or installment form.
3.) Limited Payment Premium – The person pays the premium in a
specified time line.

B. Term Insurance – This kind of insurance is contingent because the

beneficiary may either benefit or not depending if the insured dies or
survives a specific period. Thus, term insurance is wherein the insurer
pays the amount covered in a policy to the beneficiary if the insured
dies in a specified period. If, however, the insured survived in that
specified period, the contract expires and the policy has no more
value. Its distinguishing features are: (1) It has fixed period, and (2)
No cash value may be accumulated.

Also, Term Insurance may be further sub-classified into:

1. Short –Term Insurance – It depends upon which time you need
the Insurance policy. For example, a Bank requires the borrower
to be insured for the duration of his whole bank loan. This
situation contemplates that only for such duration, an insurance
policy is needed and the term is only for a short amount of time.
 2. Long-Term Insurance – As distinguished to Short-term Insurance,
this classification is used for policies that are ranging in a lengthy
amount of time. For example, Long-Term Insurances may be
converted into a Whole Life Insurance without need of
Insurability.

C. Endowment Policy – This kind of Life Insurance pays the full sum
assured to the beneficiaries if the insured dies during the policy term
or to the policy holder on maturity of the policy if he/she survives the
term. So the interest of the beneficiary is contingent upon the death
of the insured within the policy term. Meanwhile, if the insured
survives the period, the benefits will be payable to him or to his
assignees even if there is a beneficiary designated in the policy.

The main difference between Term Insurance and Endowment Policy

is that in the former, if the insured survives the policy term, the
insurance contract has no more value. On the other hand, in
Endowment Policies, there would be a lump sum given to the insured
if he survives the period. Both of them has same feature: The
beneficiaries’ interest is contingent upon the death of the insured
during the policy period.

D. Industrial Life Insurance – Is a form of Life Insurance wherein if the

face amount of insurance provided in any policy is not more than five
hundred times that of the current statutory minimum daily wage of
Manila City, and if the words “industrial policy” are printed upon the
policy as part of the descriptive matter. Premiums herein are payable
either monthly or oftener.
For example, if the minimum daily wage in Manila City is P500.00, the
amount of insurance must not exceed P250, 000.00 because if it
exceeds the 500 times the amount of minimum wage, it would fall
into other class of insurance.

E. Life Annuity – The Insurance Code provides that every contract for
payments of endowments or annuities are considered Life Insurance.
However, annuities are basically different from life insurance
because it is considered as an investment under the Civil Code. So
how would it become a specie of Life Insurance? It can be classified
as a life insurance if the payment of annuities for example in a
Company, is being directly handled by an Insurance Company. So if
those payment of annuities in a given Corporation, is contracted to
another Insurance Company, then such transaction would become a
specie of Life Insurance.
A peril is the contingent or unknown event which may cause a loss. It is the
contingency that one insures against. Its existence creates the risk, and its
occurrence results in loss.
The following are the three types of Peril:
1. LIFE (death) - A person who insures his own life can designate any person
as his beneficiary, whether or not the beneficiary has an insurable interest
in the life of the insured subject to the limits under Article 2012 in relation
to Article 739 of the New Civil Code.
2. HEALTH (illness) - Like life insurance contracts, health insurance
contracts that provide a specific periodic income to disabled persons are
not contracts of indemnity. But those that cover medical expenses are
contracts of indemnity. In these contracts, only medical expenses incurred
by the insured are paid.
Such an agreement with a health maintenance organization (HMO) is in the
nature of a non-life insurance which is primarily a contract of indemnity.
Once a member incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care provider
must pay for the same to the extent agreed upon under the contract.
3. ACCIDENT - Insurable risks must also normally be accidental in nature.
Insurance is intended to cover fortuitous or unexpected losses. Intentional
losses caused by the insured are usually uninsurable because they cannot
be reasonably predicted, and payment for them would be against public
policy. Other losses are common as to be expected rather than unexpected.
Wear and tear and depreciation are examples.
Section 248 of the Insurance Code provides that
“the proceeds of a life insurance policy must be paid immediately upon maturity of
the policy. However, the same provision also provides that, in case the maturing of
the policy was by death of the insured, it must be paid within 60 days after filing of
the claim and filing of the proof of death of the insured.”
Paragraph 2 of Section 248 of the Insurance Code provides that:

“the insured may claim the proceeds at the moment the life insurance policy
matures. And in case of maturity by death, the beneficiary may collect the
proceeds within 60 days after the filing of proof of death. Both claims must be paid
in full by the insurer, unless such proceeds are made payable in installments or as
an annuity, in which case the installments, or annuities shall be paid as they
become due.”