CONCEPT OF
INSURANCE
CONTRACT OF INSURANCE
• It is an agreement whereby one undertakes for a consideration to
indemnify another against the loss, damage or liability arising from an
unknown or contingent event [IC, Sec. 2(a)]
• A contract of insurance, to be binding from the date of application, must
have been a completed contract.
“DOING AN INSURANCE BUSINESS” OR “TRANSACTING
AN INSURANCE BUSINESS”
• Making or proposing to make, as Insurer, any insurance contract;
• Making or proposing to make, as Surety, any contract of suretyship as a vocation and not
as merely incidental to any other legitimate business or activity of the surety;
• Doing any kind of business, including a Reinsurance business, specifically recognized as
constituting the doing of an insurance business.
• Doing or proposing to do Any business in substance equivalent to any of the foregoing in
a manner designed to evade the provisions of the Insurance Code.
INSURANCE AS AN UBERRIMAE FIDES
CONTRACT
• The contract of insurance is one of perfect good faith not for the insured alone, but
equally so for the insurer.
• It requires the parties to the contract to communicate that which a party knows and ought
to communicate, that is, the duty to disclose in good faith all facts material to the contract.
INSURANCE AS CONTRACTS OF ADHESION
• An illustration of a contract of adhesion is when the insurer used “fine
print” letters in conditions stated in a contract of insurance.
CONSTRUCTION AND INTERPRETATION OF
INSURANCE CONTRACT
• GR: If the terms of the contract clearly show the intention of the
parties, there shall be no room for interpretation.
PARTIES TO THE CONTRACT OF INSURANCE
• INSURER
• INSURED
• ASSURED/BENEFICIARY
WHAT MAY BE INSURED
• It is any contingent or unknown event, whether past or future, which may
damnify a person having an insurable interest, or create a liability against
him subject to the provisions of Chapter I of the Insurance Code (IC, Sec.
3).
CONSENT OF SPOUSE NOT NECESSARY
• 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 (IC, Sec. 3).
EFFECT OF DEATH OF POLICY’S ORIGINAL OWNER
All rights, title and interest in 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 (IC, Sec. 3).
GAMES OF CHANCES CANNOT BE INSURED
• An insurance for or against the drawing of any lottery, or
for or against any chance or ticket in a lottery drawing a
prize is not authorized (IC, Sec. 4).
ELEMENTS OF AN INSURANCE CONTRACT
• Scheme to distribute losses
• Payment of premium
• Existence of insurable interest
• Assumption of Risk
• Risk of loss
CHARACTERISTICS/NATURE OF INSURANCE CONTRACTS
• Consensual
• Voluntary
• Aleatory
• Unilateral
• Conditional
CHARACTERISTICS/NATURE OF INSURANCE
CONTRACTS
• Contract of indemnity
• XPN: The principle is not applicable to life and accident insurance where the result is
death because life is not capable of pecuniary estimation.
• Personal
• Property
• Risk-distributing device
• Onerous
