Insurance Code of the Philippines
What is an Insurance Contract?
An insurance contract is an agreement where one person or company promises to protect
another person from loss, damage, or liability in exchange for payment called a premium.
You pay money (premium) → The insurance company protects you from possible loss.
Parties in an Insurance Contract
1. Insurer
The insurance company.
It assumes the risk and pays the insured if a loss happens.
Must be authorized by the Insurance Commission.
2. Insured
The person who is protected by insurance.
The one who may suffer loss.
3. Assured
The insured who will receive the insurance money.
4. Beneficiary
The person who will receive the insurance proceeds if the insured dies or if the policy says so.
Example:
Father gets life insurance
Mother receives the money → Beneficiary
---
# 3. Elements of an Insurance Contract
For insurance to exist, these must be present:
1. Insurable Interest – the person will suffer loss if something happens.
2. Risk of Loss – something bad may happen (fire, accident, death).
3. Assumption of Risk by Insurer– the company accepts the risk.
4. Risk Distribution – losses are shared among many insured people.
5. Premium – the insured pays money to the insurer.
---
# 4. Insurable Interest
Insurable interest means a person has a financial interest in something.
If the thing is lost or damaged → the person loses money or suffers damage.
Example:
You can insure your house
You can insure your car
You can insure a family member's life
If there is no insurable interest, the insurance is void.
What May Be Insured?
Insurance can cover **events that may cause loss**, such as:
* Fire
* Lightning
* Earthquake
* Storm
* Ship or marine damage
* Death
* Injury
* Accidents
* Failure to pay debt
---
# 6. What is Actuarial Risk?
**Actuarial risk** is the possibility that the **insurance company’s predictions about risk are
wrong**.
Example:
An insurance company expects a person to live **35 more years**, but the person **dies
tomorrow**.
This causes **loss to the insurance company**.
---
7. Insurance Premium
A **premium** is the **money paid by the insured to the insurance company**.
Purpose:
Payment for the insurer to **take the risk of possible loss**.
Example:
Monthly or yearly payment for insurance.
---
# 8. Characteristics of Insurance Contracts
### 1. Risk-Distributing
Risk is **shared by many people**.
### 2. Contract of Good Faith
Both parties must be **honest and truthful**.
### 3. Contract of Indemnity
The insured can **only recover the actual loss**.
⚠️ Exception:
Life insurance pays the **full policy amount**.
### 4. Contract of Adhesion
The contract is **prepared by the insurance company**, and the insured usually just agrees.
### 5. Voluntary Contract
Both parties **freely agree** to the contract.
### 6. Personal Contract
Insurance depends on the **character and identity of the insured person**.
---
What is an insurance contract?
> An insurance contract is an agreement where the insurer promises to protect the insured from
possible loss or damage in exchange for payment called a premium.