COMMERCIAL LAW REVIEW

Session 2

PREMIUM

 Premium should be paid upon delivery of the policy

o If not paid and loss occurred- The insurer is not required to pay since there is no
contract formed
 Premiums could be in credit- since there is no law prohibiting it (acc to the SC)
o May the insured recover from the insurer- for as long as the premium would be paid
within the term, the insured should be paid
 Life insurance
o Term insurance- insured in the stipulated terms
 Must be paid within one month grace period
o There are two types
 Term Insurance- the parties agree from the very start the term, definite
period
 2 kinds
o Upon arrival of the term, once the policy expired the insurer
will not have to pay the face value of the insurance
o Upon arrival of the term, once the policy expired the insurer
shall have to pay the face value of the policy (endowment
plan); most expensive insurance
 There will be extension of the term
 Ordinary- The insured will be kept insured if he keeps paying the premium
until he reaches age 100
 Why 100? Because
 There is always a grace period of one month/30 day grace period
 Automatic loan clause
o Living Benefits/Non-forfeiture value
 Only available in the alternative
 Kinds:
1. Cash value
2. Paid up insurance- If you reach your retirement age and you will not
pay premium but resume having insurance
o insurance coverage is paid as long as you are alive
3. Extended term insurance- would remain isured for the face value but
only for pre-determined period, must die within the period, if not
the policy will die
 Non-life insurance
o Annual
 Why? Because you are not sure if the property is still there
 If you foresee that you will dispose of the property- you can say that it will be
for a short term
o If you are a property insurer your commission rate will be constant
o Properties against fire- Masagana Tela Mart

 Manners of premium payment
o Life insurance
COMMERCIAL LAW REVIEW

 Mode of payment: Annual, Semi-annual, Quarterly, Monthly

 Insurer will transfer the burden to the insured if the payment mode is not
annual- administrative costs
o
 Insurer in the forms has
o Primary beneficiary- whom the insured
o Contingent- Person who should receive the proceeds when the primary cannot
receive.
o Who may be nominated as beneficiaries?
 Should the beneficiary have an insurable interest in the life of the insured?
NO
 There is no law that requires this
 Limitation- you cannot nominate someone who are disqualified by
law from receiving donation inter vivos
 Revocable v Irrevocable
 Irrevocable- You cannot change and add beneficiaries without the
prior written consent of the person who you designated as a
beneficiary
o Why is consent required? Such designation means that you
have transferred the benefits of the policy to the person
o EXN: Spouse
o Would the proceeds form part of the gross estate
 Acc to the new insurance code- if you didn’t assign
irrevocable and you died and you didn’t change it,
the designation is considered as irrevocable, will not
form part of the gross estate
o When your beneficiaries contingent and primary died, and
no name was designated will go to the estate of the insured.
Rules on intestate will apply
o

o Kinds of non-life insurance
 Accident- payment of indemnity when there is loss of body parts
 Only for eyes. There is no indemnity for ears and nose bec you can
still hear and smell
 Fire- over any structure over fire.
 If the thing gets burned, the insurer will pay indemnity the insured
 Suretyship- per se is not an insurance but becomes one if carried out by an
insurer
 Risk shifting device- insurance is not a risk shifting device
 Marine- Insurance against the perils of the sea over a
1. Vessel
2. Freightage
3. Cargos
4. as well as expected income from cargos
 Perils of the sea
 Extent of the insurable interest of the owner of the vessel
COMMERCIAL LAW REVIEW

1. Value less any loan on bottomry

o Loan taken by the owner secured by his vessel, if such will
sink the creditor cannot collect or the obligation will be
extinguished
2. In every contract, there is a warranty that the vessel is seaworthy

 Why is the insurable interest price goes down?

1. You were able to get part of the insurable interest
o Micro Insurance- life insurance
 The coverage must not be more than 1000 x minimum wage in Metro Manila