Rules of Construction:
interpreted in its ordinary meaning.
 When the terms of the agreement are
CLEAR AND EXPLICIT the terms are to
be understood literally as to what they
appear on the face of the contract.
GAISANO VS INSURANCE CO. – the agreement
is clear that what is covered in the insurance
policy are book debts.
 If there is an ambiguity in the
interpretation of the contract is shall be
made strictly against the one who
CREATED THE CONTRACT AND SHALL BE
RULED IN FAVOR OF THE INSURED.
CONTRACTS OF ADHESION – a party in a
contract prepares the stipulations while the
other party mere affixes his signature thereto.
- In these kinds of contracts the parties
do not bargain on equal footing.
- Any ambiguity will be resolved in favor
of the insured.
- Not applicable if there is no ambiguity
FINE PRINT RULE - Any ambiguity in the
contract is to be construed liberally in favor of
the insured.
- Not applicable if there is no ambiguity
QUA CHEE GAN VS LA UNION- Insurer misled
the insured when the contract was signed
because insurer in this case affirmed that the
required number of fire extinguishers were
complied with when in reality it was not.
GULF RESORTS VS PCIC – the terms of the
contract that only limits the liability to the 2
swimming pools are not ambiguous hence the
fine print rule is not applicable.
 A contract of insurance is to be
construed to the sense and meaning of
the terms to which the parties
themselves have used. If such terms
are ambiguous then it shall be
ALPHA INSURANCE VS CASTOR- Theft done
by a 3rd person against the insured is still
covered by the insurance because it was not
specified as to who should commit theft in
order for the insurance to be held liable.
Since there is no declaration of exception
theft shall be understood in its plain
meaning.
WHEN DOES THE CAUSE OF ACTION
ACCRUES IN AN INSURANCE CONTRACT? –
the moment when the insurance company
DENIES THE CLAIM.
PRESCRIPTIVE PERIOD WHEN THE CAUSE
OF ACTION OCCURS?
Insurance Contracts – 10 years
Industrial contracts – 6 years
Others – 1 year
SUMMIT VS DE GUZMAN - The prescriptive
period should commence from the date of
rejection by the insurer.
H.H. HOLLERO VS GSIS - An insured’s right
to the payment of the loss accrues the
moment of the actual happening of the loss.
The cause of action accrues at the time
when the insurance company denies or
rejected the insurance claim.
What is a Contract of Insurance? 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:
1. The insured has an insurable interest
2. The insured is subject to the risk and
loss that is the subject of the designated
perils
 3. Insurance assumes the risk of loss
4. The insured pays a premium
5. Assumption of risk is part of a general
scheme to distribute actual losses
among a large group or persons bearing
the same risks.
PHILAMCARE VS CA- A health care
agreement is in the nature of a non-life
insurance policy.
- The healthcare must pay up to the
extent covered in the healthcare
agreement.
PHIILIPPINE HEALTHCARE PROVIDERS VS CIR
- A healthcare agreement is a NON-LIFE
INSURANCE which makes it a contract
of indemnity.
- How was it proven that it was a
contract of indemnity?
a. Petitioner assumes the risk of paying for the
costs of the services even if they are
significantly and substantially more than
what the member has "prepaid."
b. Petitioner does not bear the costs alone but
distributes or spreads them out among a
large group of persons bearing a similar
risk, that is, among all the other members
of the health care program. This is
insurance.
c. the insurable interest of every member of
petitioner's health care program in obtaining
the health care agreement is his own
health
WHEN IS A SURETY CONSIDERED AN
INSURANCE? – surety must be engaged in the
making or proposing to make suretyship contracts as
a vocation and not merely incidental this means
that it must be a REGULAR BUSINESS and not
an isolated transaction.
WHAT MAY BE INSURED AGAINST? – An
unknown event or a contingent event. Either of these
2 events may DAMNIFY A PERSON HAVING AN
INSURABLE INTEREST or may CREATE A LIABILITY
AGAINST HIM.
Unknown Event – May or may not happen.
Contingent Event – An event that is certain to
happen but the time of happening is NOT CERTAIN.
Damnify a person having an Insurable Interest
– Cause direct loss to a person who has an insurable
interest.
Create Liability against him - when the insured
becomes liable to other
There can be no Insurance policy issued for or
against the drawing of any lottery or any chance
or ticker in a lottery drawing a prize.
UY VS PALOMAR – 3 elements of lottery:
a. consideration
b. prizes – the prizes came from the funds
raised by the sale of chances among the
participants in order to win the prizes.
c. Chance
- In relation to insurance, an insurance for or against the
drawing of any lottery (Section 4) is considered an
insurance that is based on wagering (Section 25)
because it is based on chance hence it is a void
contract.
KINDS OF INSURANCE:
1. Non-life insurance
2. Life insurance
LIFE INSURANCE - It is a contract of investment to
make specific payments to pay a certain person upon
the death, survival or otherwise on the contingently
on the continuance or cessation of life.
➢ It only covers human lives (pets not included).
AN INSURANCE UPON LIFE MAY BE MADE
PAYABLE UPON THE:
1. Death
2. Survival for a specific period, or
3. Continuance or cessation of life
An insurance company is not allowed to issue
both life and non-life insurance contract
concurrently.
Kinds of Life Insurance Policies
[1] Ordinary Life. – Payment of premiums is
annually or at more frequent intervals throughout
the life and the beneficiary is entitled to receive
payment only after the death of the insured. The
usual or typical policy where at the moment the
person dies, the beneficiaries will receive the
proceeds of the policy.
[2] Limited Payment Life. – Premiums are payable
only during a limited period of years (e.g. 10, 15, 20
years). After the period, the insurance is deemed
fully paid. Proceeds are payable upon the death of
insured.
[3] Term Insurance. – It provides coverage only if
the insured dies during a limited period. If the
insured dies within the period, the beneficiary gets
the proceeds. If the insured survives the period, the
contract is terminated.
➢ Otherwise stated, the person will pay for the
insurance policy and he must die within a certain
period. If he does not die within that period, then the
insurance proceeds cannot be claimed.
[4] Endowment Policy. – Insured gets a sum of
money if insured survives a specified period. If
insured dies within the period, beneficiary gets the
proceeds. This is when either way there is something
to be received, but is usually costlier.
[5] Life Annuity – explained under Art. 2021.
 if the person is still alive, he shall receive an
annual pension or income. Thus, death
operates as a resolutory condition where
the benefits stop.
Parties to Annuity Contract
1. Annuitant – places and accumulates funds
2. Debtor – binds himself to pay an annual pension
or income during the life of one or more persons
3. Beneficiary – it can be annuitant himself or other
party
Stages of Annuity Contract
1. Accumulation Phase – the annuitant deposits
capital consisting of money or other property
2. Annuitization Phase – after a certain period,
debtor shall now have the obligation to pay out
annual pension or income to the designated person.
[6] Accident Insurance. – It may be life or non-
life. If death is one of the risks insured against, it is
then classified as life insurance.
SUN INSURANCE v. CA AND NERISSA LIM
I. Definition of Accident
- The words “accident” and “accidental” are
used in an insurance contract in their
ordinary understanding and common usage
and speech of people generally. The words
“accident” and “accidental” mean that which
happens by chance or fortuitously, without
intention or design, and which is
unexpected, unusual, and unforeseen.
- Accident is an event that takes place
without one's foresight or expectation - an
event that proceeds from an unknown
cause, or is an unusual effect of a known
case, and therefore not expected.
- An accident is an event which happens
without any human agency or, if happening
through human agency, an event which,
under the circumstances, is unusual to and
not expected by the person to whom it
happens.
- It has also been defined as an injury which
happens by reason of some violence or
casualty to the insured without his design,
consent, or voluntary co-operation.
II. There Was An Unforeseen Happening
- There is an accident where “some additional,
unexpected, independent and unforeseen happening
occurs which produces or brings about their injury or
death.” There was such a happening. This was the
firing of the gun, which was the additional
unexpected and independent and unforeseen
occurrence that led to the insured person's death.
- the parties agree that Lim did not commit
suicide. Nevertheless, the petitioner contends that
the insured willfully exposed himself to needless peril
and thus removed himself from the coverage of the
insurance policy. It should be noted at the outset
that suicide and willful exposure to needless peril are
in pari materia because they both signify a disregard
for one's life. The only difference is in degree, as
suicide imports a positive act of ending such life
whereas the second act indicates a reckless risking of
it that is almost suicidal in intent.
- Lim had removed the magazine from the gun
and believed it was no longer dangerous. He
expressly assured her that the gun was not loaded.
It is submitted that Lim did not willfully expose
himself to needless peril when he pointed the gun to
his temple because the fact is that he thought it was
not unsafe to do so. The act was precisely intended
to assure Nalagon that the gun was indeed harmless.
- Lim did not know that the gun he put to his
head was loaded. Lim was unquestionably
negligent, and that negligence cost him his
own life. But it should not prevent his widow
from recovering from the insurance policy
he obtained precisely against accident.
SIMON DE LA CRUZ v. CAPITAL INSURANCE
- the mining company sponsored a boxing
contest for general entertainment where
the insured, a non-professional boxes
participated.
- Eduardo slipped and was hit by his
opponent on the left part of the back of the
head, causing Eduardo to fall, with his head
hitting the rope of the ring. He was brought
to the Baguio General Hospital unconscious,
where the insured expired on the following
day. The cause of death was reported as
hemorrhage, intracranial, left.
II. Slipping – Additional, Unexpected,
Unforeseen
- The generally accepted rule is that, death or
injury does not result from accident or
accidental means within the terms of an
accident-policy if it is the natural result of
the insured's voluntary act, unaccompanied
by anything unforeseen except the death or
injury. There is no accident when a
deliberate act is performed unless some
additional, unexpected, independent, and
unforeseen happening occurs which
produces or brings about the result of injury
or death.
- where the death or injury is not the
natural or probable result of the
insured' s voluntary act, or if something
unforeseen occurs in the doing of the act
which produces the injury, the resulting
death is within the protection of policies
 insuring against death or injury from
accident.
- while the participation of the insured in the
boxing contest is voluntary, the injury was
sustained when he slid, giving occasion
to the infliction by his opponent of the blow
that threw him to the ropes of the ring.
- The fact that boxing is attended with some
risks of external injuries does not make any
injuries received in the course of the game
not accidental. In boxing, as in other
equally physically rigorous sports, such as
basketball or baseball, death is not
ordinarily anticipated to result. If,
therefore, it ever does, the injury or death
can only be accidental or produced by some
unforeseen happening or event as what
occurred in this case.
FINMAN GENERAL ASSURANCE v. CA
- Carlie died as a result of a stab wound
inflicted by one of the three (3) unidentified
men without provocation and warning on
the part of the former as he and his cousin,
Winston Surposa, were waiting for a ride on
their way home
- The record is barren of any circumstance
showing how the stab wound was inflicted.
Nor can it be pretended that the malefactor
aimed at the insured precisely because the
killer wanted to take his life. In any event,
while the act may not exempt the unknown
perpetrator from criminal liability, the fact
remains that the happening was a pure
accident on the part of the victim. The
insured died from an event that took place
without his foresight or expectation, an
event that proceeded from an unusual effect
of a known cause and therefore, not
expected.
2 CLASSES OF INSURANCE:
1. Individual Insurance
2. Group Insurance
PINEDA VS CA - Prime Marine Services Inc., (PMSI)
procured a group policy from Insular Life to provide
life insurance coverage to its sea-based employees.
- beneficiaries, seeking to claim death
benefits, approached the President and
General Manager of PMSI, Captain Nuval
which evinced willingness to assist.
- By virtue of these written powers of
attorney, complainants-appellees were able
to receive their respective death benefits.
Unknown to them, however, the PMSI, in
its capacity as employer and policyholder of
the life insurance of its deceased workers,
filed with Insular Life formal claims for
and in behalf of the beneficiaries, through
Nuval. Submitted the SPAs as documents.
- When the beneficiaries knew that they were
entitled to the life insurance benefits under
a group policy with Insular Life they
sought to recover but it was denied since it
was already extinguished upon delivery to
and receipt by PMSI of the six (6) checks
issued in their names.
What is a Group Insurance?-> Group insurance is
essentially a single insurance contract that
provides coverage for many individuals. In its
original and most common form, group
insurance provides life or health insurance
coverage for the employees of one employer.
Although the employer may be the titular or named
insured, the insurance is actually related to the life
and health of the employee. Indeed, the employee is
in the position of a real party to the master policy,
and even in a non-contributory plan, the payment by
the employer of the entire premium is a part of the
total compensation paid for the services of the
employee. Put differently, the labor of the
employees is the true source of the benefits,
which are a form of additional compensation to
them.
We hold that PMSI, through its President and
General Manager, Capt. Nuval, acted as the
agent of Insular Life. The latter is thus bound
by the misconduct of its agent.
NON-LIFE INSURANCE –
KINDS OF NON-LIFE INSURANCE POLICIES:
A. FIRE
General Rule: Fire insurance only covers fire.
Exception: It may include lightning, windstorm,
tornado, or earthquake if such risks are
1. Covered by extension or
2. Under separate policies
B. CASUALTY - insurance covering loss or
liability arising from accident or mishap,
excluding certain types of loss which by
law or custom are considered as falling
exclusively within the scope of other
types of insurance such as fire or marine.
C. MARINE- Insurance against loss of or
damage to vessels, aircrafts etc.
D. COMPULSORY MOTOR VEHICLE
LIABILITY INSURANCE
At a glance, the compulsory motor vehicle liability
insurance is required before:
1. An owner or operator can use his vehicle;
and
2. Required in registration and renewal of
registration.

E. SURETYSHIP
WHAT MAY BE INSURED AGAINST? - Any
contingent or unknown event, whether past or future
which may damnify a person having an insurable
interest, or create a liability against him, may be
insured against, subject to the provisions of this
Chapter (Section 3).
The consent of the spouses is not necessary for the
validity of the insurance policy taken out by a
married person
1. On his or her life; or
2. That of his or her children
An insurer is not liable for a loss caused by:
1. Willful act
2. Through the connivance of the insured
Except when: not exonerated by the negligence of
1. the insured, or of
2. the insurance agents, or
3. others
In cases of Suicide: General Rule: Not
compensable.
➢ Basis:
1. Section 89. An insurer is not liable for a loss
caused by the willful act or through the connivance
of the insured; but he is not exonerated by the
negligence of the insured, or of the insurance agents
or others.
2. Rules of Court, Rule 131, Section 3. Disputable
presumptions, Subsection (c). – That a person
intends the ordinary consequences of his voluntary
act.
Exceptions: Section 183
1. It is committed after the policy has been in force
for a period of two years;
2. A shorter period if the policy provides; and
3. Suicide committed in the state of insanity
regardless of the date of commission.
These instances is no longer moved by
premeditation. The 2 years is counted from the
issuance, or if the policy has lapsed, then counted
from the reinstatement.
➢ But, if the policy itself provided that death by
suicide is an excepted risk then it is not covered.
NOTE: The 2-year period can be shortened but it
cannot be lengthened.
Guide in Determining Whether Suicide is
Compensable
1. Is it an excepted risk in the policy? If yes, then it
is not covered regardless of the lapse of period. If
not:
2. Was the suicide committed in a state of insanity?
If yes, then even if the period is less than 2 years
the death is compensable. If not:
3. Was the suicide committed after the period of 2
years or that agreed upon? If yes, the death is
compensable, if not it is not compensable.
WHAT IS AN INSURABLE INTEREST? - the
relation between the insured and a particular event
such that the happening of the event will damnify or
cause loss to the person. Thus, a person cannot
insure just anyone he wants. He has to establish that
he stands to suffer some loss because of the death of
a person.
WHO MAY HAVE AN INSURABLE INTEREST?
(Sec .10 )
A. Of himself, of his spouse and of
his children;
 Every person has unlimited insurable
interest in his own life. It is not at all
necessary that the beneficiary designated in
the policy should have any interest in the
life of the insured.
 One has insurable interest in the life of his
spouse and children on the basis of love and
affection.
B. Of any person on whom he depends wholly or
in part for education or support, or in whom he
has pecuniary interest;
This is provided under Article 195 of the Family
Code. The following are obliged to support each
other
1. The spouses;
2. Legitimate ascendants and descendants;
3. Parents and their legitimate children and
the legitimate and illegitimate children of
the latter;
4. Parents and their illegitimate children and
the legitimate and illegitimate children of
the latter; and
5. Legitimate brothers and sisters, whether
of full or half-blood.
 Those having pecuniary interest for
example, a debtor and creditor in the extent
of the debt, business partners, and
employer and employee
C. Of any person under a legal obligation to him
for the payment of money, or respecting property
or services, of which death or illness might delay
or prevent the performance; and
D.Of any person upon whose life any estate or
interest vested in him depends.
 Section 10(d) simply means that one may
insure the life of a person where the
continuation of the estate or interest vested
in him who takes the insurance depends
upon the life insured.
What is the form of an insurance policy?
 - A written instrument which is
called a policy of insurance
- The policy may be in printed form
1.] Rider is a small printed or typed stipulation
contained on a slip of paper attached to the policy
forming an integral part of the policy, it must be
referred in the contract of insurance and must be
approved by the commissioner, signature of insured
not required.
Riders are usually attached to the policy because
they constitute additional stipulations between the
parties. Ant rider properly attached to a policy is a
part of the contract to the same extent and with like
effect as if actually embodied in the policy (Ang
Giok Chip v. Springfield, 1931).
2.] Warranties those inserted to or attached to a
policy to eliminate specific potential increases of
hazard during the policy term owing to the
a. Actions of the insured; or
b. Condition of property
3.] Clause is an agreement between the insurer and
insured on certain matters relating to the liability of
insurer in case of loss; and
4.] Endorsement is any provision added to an
insurance contract altering its scope or application.
Examples of endorsement are those extending the
perils covered.
Requirements for the Attachments to be
Binding
[1] The descriptive title or name of the rider, clause,
warranty or endorsement must be mentioned and
written in the blank spaces of the policy; and
[2] The rider, clause, warrant or endorsement issued
after the original policy shall be countersigned by the
insured or owner which shall be considered as
agreement thereof.
Exception: No need for countersignature if the rider,
clause, warranty or endorsement is applied by
insured or holder.
What is a cover note? Sec. 52
Cover notes may be issued to bind insurance
temporarily pending the issuance of the policy.
Within sixty (60) days after issue of a cover note, a
policy shall be issued in lieu thereof, including
within its terms the identical insurance bound
under the cover note and the premium therefor.
Cover notes may be extended or renewed beyond
such sixty (60) days with the written approval of
the Commissioner if he determines that such
extension is not contrary to and is not for the
purpose of violating any provisions of this Code.
DIFFERENCE BETWEEN A COVER NOTE FROM
BINDING RECEIPT
COVER NOTE - Temporary insurance policies
intended to cover the insured while application is
being evaluated.
Requisites for Cover Note
1. Issued and renewed with prior approval of IC
2. Valid and binding for not more than 60
days unless the insurance commission has approved
an extension based on valid grounds a. Policy must
be issued within 60 days from issuance of cover
notes
b. 60-day period may be extended upon
written approval of the IC
3. No separate premium is required for the
cover note
4. There must be 7-day notice before
cancellation of the cover note.
NOTE: If the insured died during the period of
provisional policy which is conditioned upon approval
of application, beneficiary is not entitled to the
proceeds.
BINDING RECEIPT- Acknowledgment of receipt of
premium and application subject to evaluation.
This is not the same as a cover note.
NOTE: If the insured died during the period of
provisional policy which is conditioned upon approval
of application, beneficiary is not entitled to the
proceeds.
Acknowledgment of Receipt of Premium and
Application Subject to Evaluation is Not the
Same as a Cover Note
In life insurance, where an agreement is made
between the applicant and the insurer’s agent that
no liability shall attach until the insurer approves the
risk, the “binding slip” or the “binding receipt” does
not insure by itself.
GREPALIFE VS CA - binding deposit receipt in
question is merely an acknowledgment, on behalf
of the company, that the latter's branch office had
received from the applicant the insurance premium
and had accepted the application subject for
processing by the insurance company. and that the
latter will either approve or reject the same on the
basis of whether or not the applicant is "insurable on
standard rates."
- Pacific Life disapproved the insurance
application of Ngo Hing, binding deposit
receipt in question had never become in
force at any time.
- The acceptance is merely conditional, and is
subordinated to the act of the company in
approving or rejecting the application. Thus,
in life insurance, a "binding slip" or "binding
receipt" does not insure by itself.
- the deposit paid by private respondent shall
be refunded.

DE LIM VS SUN LIFE INSURANCE - Luis Lim died
on August 23, 1917, after issuance of the provisional
policy but before approval of application by the home
office of the insurance company
- the so-called provisional policy it amounts
to nothing but an acknowledgment on
behalf of the company, that it has received
from the person named therein the sum of
money agreed upon as the first year's
premium upon a policy to be issued upon
the application, if the application is accepted
by the company.
- So long as an application for insurance has
not been either accepted or rejected, it is
merely an offer or proposal to make a
contract.
- This is to last until the policy be issued or
the application rejected, and such contracts
are upheld and enforced when the applicant
dies before the issuance of a policy or final
rejection of the application. It is held, too,
that such contracts may rest in parol.
- But if “provisional policy” stated expressly
that the insurance take effect only when
application approved, and the policy is
duly signed – it constituted as no
agreement at all for preliminary or
temporary insurance.
WHAT DESCRIPTION IS NEEDED OF THE
INSURED IN AN INSURANCE POLICY?
The policy of insurance must specify the parties
between whom the contract is made. Although it is
usual to inert in a policy the name of the person
insured, it is not essential as he may be described in
other ways.
In any case, in order that the insurance may be
applied to the interest of the person claiming the
benefit of the policy, he must show that he is the
person named or described or that he belongs to the
class of persons comprehended in the policy.
NOTE: Where the policy is “for the owner” of
specified property, it is necessary for such person to
prove that at least he was the owner of the thing
insured at the time of the loss.
WHEN IS AN INSURANCE CONTRACT
PERFECTED? - At the time the insured-applicant has
knowledge of approval of his application.
- “an acceptance made by letter shall not
bind the person making the offer except
from the time it came to his knowledge”
-the mere signing of an application for life insurance and the
payment of the first premium do not bind the insurer to
issue a policy where there is no evidence of any contract
between the parties that such acts should constitute a
contract of insurance.
BADGER VS NEW YORK LIFE INSURANCE - There
is no contract of insurance by the mere signing of an
application for life insurance and the payment of a
first premium, without any parol agreement as to
when the insurance shall commence. Moreover,
company expressly refused to be bound until the
application had been accepted either by its office in
Shanghai or its office in New York.
One of the receipts provide that "the company shall
incur no liability under the application until it has
been received, approved at the home office of the
company, and a policy issued thereon." This is then
followed by the words of the first form both forms
are printed "conditional receipt."
ENRIQUEZ VS SUNLIFE - an acceptance made by
letter shall not bind the person making the offer
except from the time it came to his knowledge
- The contract is not perfected where the
applicant for life insurance dies before its
approval or it does not appear that the
acceptance of the application ever came to
knowledge of the applicant. We hold that
the contract for a life annuity in the case at
bar was not perfected because it has not
been proved satisfactorily that the
acceptance of the application ever came to
the knowledge of the applicant.
The delivery of the policy is not a prerequisite to a valid contract
of insurance. The contract may be completed prior to delivery of
the policy or even without the delivery of the policy depending on
the intention of the parties. Delivery may be made to the insured
in person or to his duly constitute agent
SINDAYEN VS INSULAR LIFE - An application was
made by Arturo Sindayen for a life insurance policy,
with the agreement that the balance of the first
premium will be paid by his aunt, and that policy
shall be delivered to her.
- Delivery to the insured in person is not
necessary. Delivery may be made by mail or
to a duly constituted agent.
Misstatement of Age Cash
Since the annual premium on a policy written with a level The ca
premium is based upon the attained age at the inception of annua
the policy, applicants have sometimes deliberately misstated the ea
their age. In other instances, misstatement has been the order
outgrowth of mistake. The clause provides that if the age of the an
the insured had been misstated, the amount payable under So lon
the policy shall be such as the premium paid would have practic
purchased at correct age. with th
If an applicant states his age to be such that the premium for invest
P1,000 insurance at that age is P20 and at the time of his though
death it proves that the correct premium should have been (Sun L
P25, the amount of proceeds payable shall be determined as
follows:
P25 : P20 = P1,000: x
Hence, P25x = P20,000
x = P800
Cash Surrender Value
The case surrender value arises from the fact that
the fixed annual premium is much in excess of the
annual risk during the earlier years of the policy, an
excess made necessary in order to balance the
deficiency of the same premium to meet the annual
risk during the latter years of the policy.
So long as the policy remains in force, the company
has practically no beneficial interest in it except as
its custodian, with the obligation to maintain it
unimpaired and suitably invested for the benefit of
the insured. This is practical, though not the legal,
relation of the company to this fund
WHEN IS AN INDIVIDUAL AND ENDOWMENT
POLICY VALID? – the policy is valid upon the
approval of the Commissioner.
WHAT ARE THE CRITERAIS IN ORDER TO HAVE
AN APPROVAL FROM THE COMMISSIONER?
the policy shall contain in substance the following conditions:
1. Grace Period- there must be a provision in
the policy that the policy holder is entitled
to a grace period of either 30 days or 1
month within the payment of any premium
after the first may be made.
- The insurer may charge an interest not
more than 6% per annum for the
number of days of grace elapsing
before the payment of the premium.
The policy shall continue in full force.
- If the policy becomes a claim during
the grace period before there is the
overdue premium is paid, the amount
of the premium that has interest may
be deducted.
2. Incontestability provision – the policy
will be incontestable (not able to be
disputed) if it shall have been in force
during the lifetime of the insured FOR A
PERIOD OF 2 YEARS from the date of
issuance. EXCEPTION to this provision is:
 Non-payment of premium
 Violation of the conditions of
the policy relating to military or
naval service in time of war
3. Entire Contract Provision - policy shall
constitute the entire contract between the
parties.
- if the company desires to MAKE THE
APPLICATION A PART OF THE CONTRACT it
may do so provided a copy of such
application shall be indorsed upon or
attached to the policy when issued, and in
such case the policy shall contain a
provision that the policy and the application
therefor shall constitute the entire contract
between the parties.
4. Misstatement of Age Provision- a
to elect one of the said options within the time
provision that requires the age of the
specified in the policy, one of said options shall
insured in order to determine the
automatically take effect and
amount of premium needed to be paid
➢ no policyholder shall ever forfeit his right to
as well as the benefits to the insured
same by reason of his failure to so elect
BUT the age was misstated the effect
would be that amount payable under the
policy shall be such as the premium would
have purchased at the correct age
5. Participating Provision- a policy is
participating if the company shall
periodically ascertain and apportion any
divisible surplus accruing on the policy
under conditions specified therein
6. Cash Surrender Option- options to which
the policyholder is entitled to in the event of
default in a premium payment after three
(3) full annual premiums shall have been
paid. These are example provisions:
- payable upon surrender of the policy which
shall not be less than the reserve on the
policy, the basis of which shall be indicated,
for the then current policy year and any
dividend additions thereto, reduced by a
surrender charge which shall not be more
than one-fifth (1/5) of the entire reserve or
two and one-half percent (2½%) of the
amount insured and any dividend additions
thereto; and
- (2) One or more paid-up benefits on a plan
or plans specified in the policy of such value
as may be purchased by the cash surrender
value.
7. Policy Loan provision- any time after a cash
surrender value is available under the policy
and while the policy is in force, the company
will advance, on proper assignment or
pledge of the policy and on sole security
thereof, a sum equal to, or at the option of
the owner of the policy, less than the cash
surrender value on the policy, at a specified
rate of interest, not more than the
maximum allowed by law, to be determined
by the company from time to time, but not
more often than once a year, subject to the
approval of the Commissioner; and that the
company will deduct from such loan value
any existing indebtedness on the policy and
any unpaid balance of the premium for the
current policy year, and may collect interest
in advance on the loan to the end of the
current policy year, which provision may
further provide that such loan may be
deferred for not exceeding six (6) months
after the application therefor is made;
8. Tabel of Surrender Values and Paid-up
options - A table showing in figures cash
surrender values and paid-up options
available under the policy each year upon
default in premium payments, during at
least twenty (20) years of the policy
beginning with the year in which the values
and options first become available, together
with a provision that
➢ in the event of the failure of the policyholder

9. Table of Proceeds of Policy Payable by
Installments
In case the proceeds of a policy are payable in
installments or as an annuity, a table showing the
minimum amounts of the installments or annuity
payments;
10.Reinstatement Provision- policyholder shall be
entitled to have the policy reinstated at any time
within three (3) years from the date of default
of premium payment
➢ UNLESS the cash surrender value has been duly
paid, or the extension period has expired,
upon production of evidence of insurability
satisfactory to the company and upon payment of
all overdue premiums and any indebtedness to
the company upon said policy, with interest rate
not exceeding that which would have been applicable
to said premiums and indebtedness in the policy
years prior to reinstatement. Any of the foregoing
provisions or portions thereof not applicable to single
premium or term policies shall to that extent not be
incorporated therein; and any such policy may be
issued and delivered in the Philippines which in the
opinion of the Commissioner contains provisions on
any one or more of the foregoing requirements more
favorable to the policyholder than hereinbefore
required.
This section shall not apply to policies of group life or
industrial life insurance.
When is a Group Policy Valid?
1. Grace Period - policyholder is
entitled to a grace period of either thirty
(30) days or of one (1) month for the
payment of any premium due after the first,
during which grace period the death benefit
coverage shall continue in force, unless the
policyholder shall have given the insurer
written notice of discontinuance in
advance of the date of discontinuance and
in accordance with the terms of the policy.
- for the payment of a pro rata premium for
the time the policy is in force during such
grace period;
2. Incontestability Clause – the
validity of the policy shall not be contested, except for
nonpayment of premiums after it has been in force for
two (2) years from its date of issue.
- no statement made by any insured under the policy
relating to his insurability shall be used in contesting
the validity of the insurance with respect to which such
statement was made after such insurance has been in
force prior to the contest for a period of two (2) years
during such person’s lifetime nor unless contained in a
written instrument signed by him
3. Representation not
warranties- copy of the application, if
any, of the policyholder shall be attached to
the policy when issued, that all statements
made by the policyholder or by persons
insured shall be deemed representations
and not warranties, and that no statement
made by any insured shall be used in any
contest unless a copy of the instrument
containing the statement is or has been
furnished to such person or to his
beneficiary
4. Right to be furnished evidence of
Insurability - the insurer reserves the right
to require a person eligible for insurance to
furnish evidence of individual insurability
satisfactory to the insurer as a condition to
part or all of his coverage
5. Misstatement of Age – There must be
provision that will make an equitable
adjustment of premiums or of benefits or of
BOTH if there is a misstatement of age by
the insured and such provision contains a
clear statement of the method of
adjustment to be used.
6. Facilities of Payment Provision- any sum
becoming due by reason of death of the
person insured shall be payable to the
beneficiary designated by the insured,
subject to the provisions of the policy in the
event that there is no designated
beneficiary, as to all or any part of such
sum, living at the death of the insured, and
subject to any right reserved by the insurer
in the policy and set forth in the certificate
to pay at its option a part of such sum not
exceeding Five hundred pesos (P500.00) to
any person appearing to the insurer to be
equitably entitled thereto by reason of
having incurred funeral or other expenses
incident to the last illness or, death of the
person insured
7. Delivery of Statement of Insurance
Protection - the insurer will issue to the
policyholder for delivery to each person
insured a statement as to the insurance
protection regarding:
A. to which he is entitled,
B. to whom the insurance benefits are
payable,
C. and the rights set forth in paragraphs
(h), (i) and (j) following
8. In case of termination of a person
covered - if the insurance, or any portion
of it, on a person covered under the policy
ceases because of termination of
employment or of membership in the class
or classes eligible for coverage under the
policy, such person shall be entitled to have
issued to him by the insurer, without
evidence of insurability, an individual
policy of life insurance without disability or
other supplementary benefits, provided
application for the individual policy and
payment of the first premium to the
insurer shall be made within thirty (30)
days after such termination, and provided
further that:
 (1) The individual policy shall be on any one
of the forms, except term insurance, then
customarily issued by the insurer at the age
and for an amount not in excess of the
coverage under the group policy; and
(2) The premium on the individual policy
shall be at the insurer’s then customary
rate applicable to the form and amount of
the individual policy, to the class of risk to
which such person then belongs, and to his
age attained on the effective date of the
individual policy.
9. if the insured for 5 year prior to termination
-if the group policy terminates or is amended so as
to terminate the insurance of any class of insured
persons, every person insured thereunder at the
date of such termination whose insurance terminates
and who has been so insured for five (5) years
prior to such termination date shall be entitled to
have issued to him by the insurer an individual
policy of life insurance subject to the same
limitations as set forth in paragraph (h),
➢ except that the group policy may provide that the
amount of such individual policy shall not exceed the
amount of the person’s life insurance protection
ceasing;
10.If dies within 30-day period to apply
individual life- if a person insured under the group policy
dies during the thirty (30)-day period within which he would have
been entitled to an individual policy issued to him in accordance
with paragraphs (h) and (i) above and before such individual
policy shall have become effective, the amount of life insurance
which he would have been entitled to have issued to him as an
individual policy shall be payable as a claim under the group
policy.
10. Statement delivered to Insured Debtors
- a policy issued to a creditor to insure
debtors of such creditor, a provision that
the insurer will furnish to the policyholder
for delivery to each debtor insured under
the policy a form which will contain a
statement that the life of the debtor is
insured under the policy and that any death
benefit paid thereunder by reason of his
death shall be applied to reduce or
extinguish indebtedness. “The provisions of
paragraphs (f) to (j) shall not apply to
policies issued to a creditor to insure his
debtors. If a group life policy is on a plan of
insurance other than term, it shall contain a
non-forfeiture provision or provisions
which in the opinion of the Commissioner is
or are equitable to the insured or the
policyholder: Provided, That nothing herein
contained shall be so construed as to
require group life policies to contain the
same non-forfeiture provisions as are
required of individual life policies.
WHEN IS AN INDUSTRIAL LIFE INSURANCE
POLICY VALID? - this is an insurance policy that
means that form of life insurance under which the premiums
are payable either monthly or oftener, if the face amount of
insurance provided in any policy is not more than five hundred
times that of the current statutory minimum daily wage in the City
of Manila, and if the words industrial policy are printed upon
policy as part of descriptive matter.
shall not lapse for nonpayment of premium if such
nonpayment was due to the failure of the company
to send its representative or agent to the insured at
the residence of the insured or at some other place
indicated by him for the purpose of collecting such
premium:
➢ Provided, That the provisions of this paragraph
shall not apply when the premium on the policy
remains unpaid for a period of three (3) months or
twelve (12) weeks after the grace period has expired
1. Grace period - the insured is ENTITLED TO A
GRACE PERIOD OF FOUR (4) WEEKS within which the
payment of any premium after the first may be made,
except that where premiums are payable monthly, the
period of grace shall be either one (1) month or thirty
(30) days; and that during the period of grace, the
policy shall continue in full force, but if during such
grace period the policy becomes a claim, then any
overdue and unpaid premiums may be deducted from
any amount payable under the policy in settlement;
2. the policy shall be incontestable after it has
been in force during the lifetime of the
insured for a specified period, not more
than two (2) years from its date of issue,
Exception:
1. except for nonpayment of premiums
and
2. except for violation of the conditions of
the policy relating to naval or military
service, or services auxiliary thereto, and
3. except as to provisions relating to
benefits in the event of disability as defined
in the policy, and those granting additional
insurance specifically against death by
accident or by accidental means, or to
additional insurance against loss of, or loss
of use of, specific members of the body
3.