Definition of Insurance

Republic Act No. 10607, also known as the "Insurance Code of the Philippines," defines insurance as a contract whereby
one undertakes to indemnify another against loss, damage or liability arising from an unknown or contingent event. In
insurance, the insured pays a premium to the insurer in exchange for a promise that the insurer will provide
compensation or benefits in the event that a specific loss occurs. The purpose of insurance is to provide financial
protection to individuals, businesses, and other entities against the risks and uncertainties of life.
Insurance is a mechanism by which individuals or entities transfer the risk of potential loss to an insurer in exchange for
a premium. It is a contract between the insured and the insurer in which the insurer agrees to compensate the insured for
a covered loss or damage in exchange for the premium paid by the insured. The purpose of insurance is to provide
financial protection against unexpected events such as accidents, illnesses, natural disasters, or other losses that could
result in financial hardship. Insurance allows individuals and businesses to manage risk and protect their assets, while
spreading the cost of potential losses across a larger group of policyholders.
Basic Type of Insurance
 Life insurance: This type of insurance provides financial protection to your family or dependents in the event of
your death. It pays out a lump sum to your beneficiaries upon your death.
 Health insurance: This type of insurance helps cover the cost of medical expenses, including doctor visits,
hospital stays, and prescription drugs.
 Auto insurance: This type of insurance provides coverage for damages and injuries that may occur as a result of
a car accident.
 Homeowners insurance: This type of insurance provides coverage for damages or losses to your home and
personal property due to unexpected events, such as fire, theft, or natural disasters.
 Liability insurance: This type of insurance covers damages or injuries that you may be responsible for causing
to others. It includes several subtypes, including general liability insurance, professional liability insurance, and
product liability insurance.
 Disability insurance: This type of insurance provides financial protection in the event that you become disabled
and are unable to work. It pays out a portion of your income to help cover your expenses.
 Long-term care insurance: This type of insurance helps cover the cost of long-term care services, such as
nursing home care, in-home care, or assisted living facilities, if you become unable to care for yourself due to
illness, disability, or old age.

Non-life Insurance Products

Non-life insurance products, also known as property and casualty insurance, cover loss or damage to property or assets
and liability to third parties. Here are some common examples of non-life insurance products:
1. Fire insurance: This type of insurance provides coverage for damages or loss of property due to fire.
2. Marine insurance: This type of insurance covers damages or losses to ships and cargo during transport.
3. Motor vehicle insurance: This type of insurance provides coverage for damages or losses to vehicles due to
accidents, theft, or natural disasters.
4. Home insurance: This type of insurance provides coverage for damages or losses to homes and personal
property due to unexpected events, such as fire, theft, or natural disasters.
5. Personal accident insurance: This type of insurance provides coverage for injuries or death resulting from an
accident.
6. Travel insurance: This type of insurance provides coverage for unexpected events that may occur while
traveling, such as trip cancellations, medical emergencies, lost baggage, and more.
7. Crop insurance: This type of insurance provides coverage for loss or damage to crops due to natural disasters,
pests, or diseases.
8. Engineering insurance: This type of insurance provides coverage for damages or losses to construction projects,
machinery, and equipment.
9. Liability insurance: This type of insurance covers damages or injuries that you may be responsible for causing
to others. It includes several subtypes, including general liability insurance, professional liability insurance, and
product liability insurance.
 10. Terrorism insurance: This type of insurance provides coverage for damages or losses resulting from acts of
terrorism.

The law identifies the different types of insurance companies that are authorized to operate in the Philippines. These include life
insurance companies, non-life insurance companies, and reinsurance companies.

Life insurance companies offer life insurance policies that provide financial protection to the insured's beneficiaries in the event of
their death, and may also offer other types of policies such as health insurance, education plans, and retirement plans.
Non-life insurance companies offer various types of property and casualty insurance products such as fire insurance, motor vehicle
insurance, personal accident insurance, travel insurance, and others.
Reinsurance companies provide insurance to other insurance companies, helping to spread the risk of large losses across a broader
pool of insurers. Reinsurance is used to manage risk and ensure that insurance companies can pay claims even in the event of a
major disaster.

Example of Reinsurance
1. Catastrophe Reinsurance: This type of reinsurance provides coverage for losses resulting from natural disasters
such as hurricanes, earthquakes, and floods. It is designed to help insurance companies manage their exposure to
catastrophic events that could cause significant losses.
2. Excess of Loss Reinsurance: This type of reinsurance provides coverage for losses that exceed a certain
threshold. For example, an insurance company may purchase excess of loss reinsurance that covers losses above
$1 million.
3. Quota Share Reinsurance: This type of reinsurance involves the sharing of risk between the insurance company
and the reinsurer. The reinsurer agrees to accept a percentage of the premiums and losses from the insurance
company.
4. Surplus Reinsurance: This type of reinsurance provides coverage for losses that exceed the insurance company's
policy limits. It is designed to protect the insurance company from large losses that could threaten its solvency.
5. Stop Loss Reinsurance: This type of reinsurance provides coverage for losses that exceed a certain limit. For
example, an insurance company may purchase stop loss reinsurance that covers losses above $500,000.