MAS 100: Insurance

• A contract of insurance is an agreement whereby one who undertakes, for a consideration, to indemnify another against loss, damage, or liability arising from an unknown or contingent event.
• The risk insured against may be any contingency or unknown event, the happening of which will damnify a person having an insurable interest or will create liability against him.
• Even fortuitous events may be insured against.
• Parties to a contract of Insurance

  1. Insured
  2. Insurer
  3. Assured
  4. Beneficiary
• The insurer is the party who agrees to indemnify another upon the happening of specified contingency. This is the company that provides the insurance coverage.
• The insured is the party to be indemnified in case of a loss. This is the person or entity that is covered by the insurance policy.
• The beneficiary is the person who receives the benefits of an insurance policy upon its maturity. It is a person or entity designated to receive the benefits from an insurance policy in the event of a claim.
• The assured can be another term for the insured, or someone with a financial interest in the insurance.
• Elements of an insurance contract:

  1. The insured possesses insurable interest capable of pecuniary estimation
  2. The insurer assumes the risk of loss.
  3. The insured pays a premium which is his ratable contribution to the general insurance fund.
  4. The insured is subject to a risk of loss upon the happening of the designated peril.
  5. The assumption of risk is part of a general scheme to distribute actual losses among a large group or substantial number or persons bearing similar risks.
• Uberrimae Fides contract

  • The contract of insurance is one of perfect good faith, not for the insured alone, but equally so for the insurer. In fact, it is more for the latter since the insurer's dominant bargaining position carries with it stricter responsibility.
• Contract of Indemnity

  • The insured is entitle to recover only the amount of total loss sustained, and the burden is upon him to prove the amount of such loss.
• Risk Distributing Device

  • The risk of economic loss is distributed among a large group of people bearing the same risk.
• Aleatory

  • The obligation of the insurer to pay the proceeds of the insurance arises only upon the happening of an event which is uncertain. It does not depend upon some contingent event.
• Contract of Adhesion

  • An insurance contract is a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify.
• An insurance contract is a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify.
• Personal

  • The law presumes that the insurer considered the personal qualification of the insured in approving the insurance application. The insured cannot assign, before the happening of the loss, his rights under a property policy without the consent of the insurer.
• Voluntary

  • A contract of insurance is not compulsory, and the parties may incorporate such terms and conditions as they may deem convenient. This is allowed provided that they do not contravene any provision of law and are not against public policy.
• Synallagmatic

  • Both the insured and insurer have reciprocal obligations of equal value to each other.
• Characteristics and nature of insurance contracts:

  1. Uberrimae Fides contract
  2. Contract of Indemnity
  3. Risk Distributing device
  4. Aleatory
  5. Contract of Adhesion
  6. Personal
  7. Voluntary
  8. Synallagmatic
• Rescission or cancellation of insurance contracts:

  1. Non-payment of premium
  2. Fraud or material misinterpretation
  3. Physical changes in the property which result in the property becoming uninsurable.
  4. Conviction of a crime arising from out of acts increasing the hazard insured against.
  5. Willful or reckless acts
  6. Determination by the Insurance Commissioner that the policy would violate the insurance code.