A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify

another against loss, damage, or liability arising from an unknown or contingent event

Elements of an insurance contract (PARIS):

 Payment of premium- in consideration of money. Contributed in a general insurance form

 Assumption of risk- assume the risk of loss
 Risk of loss- by the happening of the designated peril
 Insurable interest- the insured possesses an interest of some kind that is susceptible of
pecuniary estimation.
 Scheme to distribute losses- untimely death

Characteristics of an Insurance Contract

1. Consensual- all contracts are perfected by mere contracts unless the law says otherwise
2. Voluntary
3. Aleatory- contracts where one or both parties reciprocally bind themselves to give or to do
something upon the happening of a certain event which is uncertain to occur in an
indeterminate time
4. Unilateral- the obligation only pertains to the insurer which is to indemnify. It is executed as to
the insured after the payment of the premium. It is executory on the part of the insurer if the
uncertain event happened.
5. Conditional- the liability of the insurer depends on the happening of an uncertain event
6. Contract of indemnity- commensurate with the loss of the insured. Not applicable to life and
health because you cannot assign an amount on our lives. Not capable of pecuniary estimation.
Exception of the exception, the amount of the debt by the debtor to the creditor does not cover
this exemption. The creditor will receive the indemnification only up to the amount of the debt.
7. Personal- each party having in view the character, the credit, and the conduct of the other then
the law assumes the insurer review the personal qualification of the insured upon the creation
of the insurance application. Need for evaluation for any risks, work, comorbidity

Parties to a contract of insurance

1. Insurer- party who assumes or accepts the risk of loss and undertakes for a consideration to
indemnify the insured on the happening of a specified contingency or event
2. Insured-person in whose favor the contract is operative and is indemnified
3. Assured/beneficiary- a person designated by the terms of the policy to receive the proceeds of
the insurance. He may be the insured of a third party in the contract whose benefit the policy
and to whom the loss is payable

Who may be an insurer?

Every corporation, partnership, or association (CPA) duly authorized by the insurance commission to
transact business may be an insurer. Sole proprietorship is not allowed

Who may be insured?

Anyone except a public enemy may be insured

Public enemy is a natin at war with the Philippines and every citizen or subject of such nation

Rules in the designation of the beneficiary

Life:

 A person who insures his own life can designate any person as his beneficiary, whether or not
the beneficiary has the insurable interest in the life of the insured subject to the limitation under
Art. 739 and Art 2012 of the NCC (739: who are the persons who cannot donate to each other)
o Persons who are guilty of adultery or concubinage
o Persons who are guilty of the same offense
o Made to a public officer, his wife, his ascendants or descendants by reason by his office
 A person who insures the life of another person and name himself as the beneficiary must have
an insurable interest in such life. (Sec. 10).
o Dapat may insurable interest
o Example: Insured the life of the president , there is no insurable interest
 As a general rule, the designation of a beneficiary is revocable unless the insured expressly
waived the right to revoke in the policy (Sec. 11)
 The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is
the principal accomplice of accessory in willfully bringing about the death of the insured in
which event, the nearest relative (if there is no innocent beneficiary) of the insured shall receive
the proceeds of said insurance if not otherwise disqualified. (Sec 12)

Property:

The beneficiary of property insurance must be an insurable interest in such property, which must
exist not only at the same time in the policy takes effect but also when the loss occurred

If you sell the property, when the loss occurs you are no longer the beneficiary, then there will be no
indemnification to both the old owner and the new owner.

Irrevocable Designation of the beneficiary

The insured cannot act to divest the irrevocable beneficiary, in whole or in part, without the
beneficiary’s consent

To be specific:

(1) The beneficiary designated in a life insurance contract cannot be changed without the consent
of the beneficiary because he has a vested interest in the policy (Philam v. Pineda, G.R. No.
54216, July 19, 1989, citing Gccio v. Sunlife, GR. No. 23703)
(2) Neither can be insured take the cash surrender value, assign or even borrow on said policy
without the beneficiary’s consent
(3) The insured cannot add another beneficiary because that would reduce the amount which the
first beneficiary may recover and therefore adversely affect his vested right
(4) Unless the policy allows, the insured cannot even designate another beneficiary should the
original beneficiary predecease him. His estate acquires the beneficiary’s vested right upon his
death; and
 (5) The insured cannot allow his creditors to attach or execute on the policy’

Insurable interest

A. In general
A person has an insurable interest in the subject matter if he is so connected, so situated, so
circumstanced, so related, that by preservation of the same shall derive pecuniary benefit, aby
its destruction he shall suffer pecuniary loss, damage or prejudice
B. Life
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 (Pag
Nawala yan wala na magsusupport sayo)
c. Of any person under a legal obligation to him to pay money or respecting property or
services, of which death or illness might delay or prevent performance and
d. Of any person upon whose life any estate or interest vested in him depends (Sec. 10)
(Example partnership, if may namatay na partner, then may insurable interest)

When should it exist?

- When the insurance takes effect

- For example: You got an insurance when your uncle still pays for your tuition fee, by the time of
his death, you no longer depend on him. You are still the beneficiary because the insurance
exists by the time the insurance takes effect and not at the time of loss in the absence of the
insurable interest.

Amount:

General rule: There is no limit in the amount the insured can insure his life

Exception: In a creditor-debtor relationship where the creditor insures the life of his debtor, the limit of
insurable interest is equal to the amount of debt.

Example: Pag ininsure mo ang buhay ni debtor, tapos nabayaran nya na yung utang nya bago pa man
siya mamatay, hindi mo na matatanggap yung indemnification pagkamatay nung debtor

C. Property

Every interest in property whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that the contemplated peril might directly damnify the insured (Sec 13),
which may consist in:

a. An existing interest (House already owned)

b. Any inchoate interest founded on an existing interest (Interest of a stockholder until
after the liquidation you can receive the capital) or
c. An expectancy coupled with an existing interest in that out of which the expectancy
arises (Sec 14)
When it should exist: When the insurance takes effect and when the loss occurs, but need not exist at
the same time (Pwedeng insurable interest mo nung inavail mo yung insurance, tas binenta mo then
nirepurchase mo, so meron ka pa reng insurable interest kasi binuy back mo)

Amount: The measure of the insurable interest in property is the extent to which the insured might be
damnified by loss or injury thereof. (Sec 17)

Classes of Insurance Contracts

1. Life insurance
a. Individual life
b. Group life
c. Industrial life
2. Non-life insurance
a. Marine
b. Fire
c. Casualty
3. Contracts of suretyship or bonding
4. Compulsory Moto vehicle liability Insurance
5. Micro insurance

Variable Contracts

Any policy or contract on either a group or on an individual basis issued by an insurance company
providing for benefits or other contractual payments or values thereunder to vary so as to reflect
investment results of any segregated portfolio of investments or of a designated separate account in
which amounts received in connection with such contracts shall have been placed and accounted for
separately and apart from other investments and accounts. This contract may also provide benefits or
values incidental thereto payable in fixed or variable amounts, or both