LIFE INSURANCE

Section 179: Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

Section 180: 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. Every contract or pledge for the payment of endownments or annuities shall be considered a life insurance contract for purpose of this Code. In the absence of a judicial guardian, the father or in the latters absence or incapacity, the mother, of any minor, who is an insured or a beneficiary under a contract of life, health, or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minors consent to any ransaction on the policy.

Life Insurance Defined 1. Life insurance may be defined as insurance payable on the death of a person, or on his surviving a specified period or otherwise contingently on the continuance or cessation of life. 2. It has also been defined as a mutual agreement by which a party agrees to pay a given sum on the happening of a particular event contingent on the duration of human life, in consideration of the payment of a smaller sum immediately, or in periodical payments by the other party. 3. Essentially, life insurance is a contract to make specific payments to pay to a certain person, the beneficiary, upon the death of a person whose life has been insured.

Parties Involved in a Policy of Life Insurance 1. The owner of the policy, who has the power to name or change the beneficiary, to assign the policy (under certain conditions), cash it in for its surrender value, or use it as collateral in obtaining a loan; and the obligation to pay the premiums; 2. The person whose life is the subject of the policy, also known as the cestui que vie; and 3. The beneficiary to whom the proceeds are paid.

Life Insurance Distinguished from Fire and Marine Insurance 1. The former is not a contract of indemnity (save that effected by a creditor on life of debtor) but a contract of investment, while, the latter are contracts of indemnity. 2. The former is always regarded as a valued policy, while the latter may be open or valued; 3. A life policy may be transferred or assigned to any person even if he has no insurable interest, while in the case of a fire or marine policy, the transferee or assignee must have an insurable interest in the thing insured; 4. Unless expressly required, the consent of the insurer is not essential to the validity of the assignment of a life policy, while such consent, in the absence of waiver by the insurer, is essential in the assignment of a fire or marine insurance. 5. In former (save that effected by a creditor on life of debtor), insurable interest in the life or health of the person insured need not exist after the insurance takes effect or when the loss occurs, while in the latter, the insurable interest in the property insured must exist not only when the insurance takes effect but also when the loss occurs.

6. In the former, insurable interest need not have any legal basis while in the latter, insurable interest must have a legal basis. 7. In the former, the contingency that is contemplated is a certain event, the only uncertainty being the time when it will take place, while in the latter, the contingency insured against may or may not occur; 8. In the former (unless written only for a term), the liability of the insurer to make payment is certain, the only uncertain element being when such payment must be made, while in the latter, liability is uncertain because the happening of the peril insured against is uncertain; in other words, in the former, the amount insured will have to be paid sooner or later, while in the latter, the amount insured may not have to be paid; 9. The former, although it may be terminated by the insured, cannot be cancelled bythe insurer, and, therefore, is usually a long term contract, while the latter may be cancelled by either party and is usually for a term of one (1) year. 10. In the former, the loss to the beneficiary caused by the

death of the insured can seldom be measured accurately in terms of cash value, while the reverse is generally true of the loss of property; 11. In the former, the beneficiary is under no obligation to prove

actual financial loss as a result of the death of the insured in order

to collect the insurance, while in the latter, the insured is required to submit proof of his actual pecuniary loss as a condition precedent to collecting the insurance.

Kinds of Life Insurance Policies 1. Ordinary life policy is one under the terms of which the insured is required to pay a certain fixed premium annually or at more frequent intervals throughout his entire life and the beneficiary is entitled to receive payment under the policy only after death of the insured. 2. Limited payment life policy is one under the terms of which the premiums are payable only during a limited period of years, usually ten, fifteen or twenty. 3. Term insurance policy is one which provides coverage only if the insured dies during a limited period. 4. Endowment policy is one under the terms of which the insurer binds himself to pay a fixed sum to the insured if he survives for a specified period, or if he dies within such period, to some other person indicated.

Scope of Life Insurance

1. Life insurance undrtakes to protect the insureds family, creditors or others against pecuniary loss which may be the outgrowth of the death of the insured. From the economic standpoint, death maybe: a. Actual Death This classification represents the so called casket death. b. Living Death This involves permanent disability c. Retirement Death - Living beyond the period of earning capacity represents this classification of death. 2. Health, accident and disability insurance provides benefits for hospital or medical expenses, or for loss of time or earning power because of injury or illness.

Annuity Contracts Distinguished from Ordinary Life Policies 1. An annuity contract, unlike the life insurance contract, insures against economic problems resulting from a long life, rather than an early death. 2. From the insurers viewpoint, insurance looks to longevity, while annuity, to transiency.

3. Under the ordinary life insurance policy, the insured pays to the insurer an annuity and his beneficiary receives at the insureds death the lump sum payment. 4. An annuity appears more like an investment instead of an insurance, which may or may not turn out to be profitable, while life insurance has a characteristic akin to indemnity i.e. the insurer will reimburse the insureds beneficiaries a large sum upon the insureds death.

Section 180-A: The insurer in a life insurance contract shall be liable in case of suicide only when it is committed after the policy has been in force for a period of two years from the date of its issue or of its last reinstatement, unless the policy provides a shorter period; provided, however, that suicide committed in the state of insanity shall be

compensable regardless of the date of commission.

Liability of Insurer in case of Suicide 1. When liable a. The suicide is committed after the policy has been in force for a period of two (2) years from the date of its issue or of its last reinstatement

b. The suicide is committed after a shorter period provided in the policy although within the two year period c. The suicide is committed in the state of insanity regardless of the date of commission, unles suicide is an excepted risk.

2. When not liable a. The suicide is not by reson of insanity and is committed within the two year period. b. The suicide is by reason of insanity but is not among the risks assumed by the insurer regardless of the date of commission. c. The insurer can show that the policy was obtained with the intention to commit suicide even in the absence of any suicide exclusion in the policy.

Section 181: A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered.

Necessity of Consent of Beneficiary to Assignment 1. With waiver of right to change beneficiary In accordance with the rule that a beneficiary of an ordinary life insurance policy which contains an express waiver of the right to change the beneficiary

acquires a vested and absolute interest which cannot be divested without his consent. 2. Without such waiver On the other hand, where the policy contains no such waiver, the insured may assign the policy without the consent of the beneficiary.

Section 182: Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required.

Notice to Insurer of Transfer 1. Notice not required by policy If the policy does not expressly require the insured to give notice of an assignment or transfer of the policy to the insurer, such notice is not essential to the validity of the assignment. 2. Notice required by policy Where notice to the insurer is required by the provisions of the policy, an assignment without such notice, in the absence of waiver shall have no effect so far as the insurer is concerned. 3. Assignment with consent of insurer Whether or not the policy expressly requires that notice of an assignment or transfer must be given to the insurer, the assignment with the consent of the insurer, creates in effect a novation.

Section

183:

Unless

the

interest

of

person

insured

is

susceptible of exact pecuniary measurement, the measure of the indemnity under a policy of insurance upon life or health is the sum fixed in the policy.

Measure of Indemnity under Life Policy The extent or amount of indemnity payable on the death of the insured under a policy of insurance upon life or health is the amount fixed in the policy. In effect, life policies are valued ones. In property insurance which is fundamentally a contract of indemnity, the measure of indemnity depends on whether the policy is an open or a valued policy.