Insurance Code Reviewer: Terms and Definitions
1. Contract of Insurance
● Definition: An agreement where one party (the insurer) promises to protect or pay
another party (the insured) against loss, damage, or legal responsibility that comes from
an unknown or unexpected event.
● Think of it as: A formal promise of protection for a fee.
2. Doing an Insurance Business
● Definition: This means engaging in activities like making insurance contracts, acting as
a guarantor (surety) as a main job, or doing any business that is essentially insurance,
even if no profit is made.
● Think of it as: Operating as an insurance company.
3. Commissioner
● Definition: Refers to the Insurance Commissioner, the official in charge of regulating the
insurance industry.
● Think of it as: The "boss" of all insurance companies and rules.
4. Insurable Interest (General)
● Definition: Any uncertain event, whether it happened in the past or will happen in the
future, that could cause financial harm to a person can be insured against, as long as
that person has an "insurable interest".
● Think of it as: You have a real financial stake or connection to something, so you would
lose money or be negatively affected if something bad happened to it.
5. Insurable Interest (Life and Health)
● Definition: You have this interest in your own life and health, your spouse and children,
anyone who depends on you for financial support or education, anyone who owes you
money or services, and anyone whose life financially affects you.
● Think of it as: Someone's life or health has a financial value to you.
6. Insurable Interest (Property)
● Definition: This means you have a financial stake in real or personal property (like a
house or car) such that a future danger could directly harm you financially. This interest
can be an existing one, one that's developing, or an expectation coupled with an existing
interest. It must exist when the insurance starts and when a loss occurs.
● Think of it as: You would lose money if your property (or property you have a financial
connection to) is damaged or lost.
7. Concealment
● Definition: When a person fails to share important information they know and should
have told the other party in an insurance contract.
● Think of it as: Hiding an important fact on purpose or by accident. If material, it can lead
to contract cancellation.
8. Materiality
● Definition: This is determined not by what actually happens, but by how much a fact
would likely influence the other party's decision about the insurance contract or their
inquiries.
● Think of it as: How important a piece of information is to the insurance company's
decision.
9. Representation
● Definition: A statement made either orally or in writing, at the time of or before the
insurance policy is issued. A representation about the future is considered a promise
unless it's just a belief or expectation.
● Think of it as: A statement you make when applying for insurance.
10. False Representation
● Definition: When the actual facts don't match what was stated or agreed upon in the
representation. If a representation is false in an important way, the injured party can
cancel the contract.
● Think of it as: What you said about something wasn't true.
11. Policy of Insurance (or Policy)
● Definition: The written document that sets out the insurance contract. It must specify the
parties involved, the insured amount, the premium, the property or life insured, the
insured's interest, the risks covered, and the duration of the insurance. Policies can also
be in electronic form.
● Think of it as: Your official insurance contract.
12. Cover Notes
● Definition: Temporary agreements issued to provide immediate insurance coverage
while the full policy is being prepared. A proper policy should be issued within 60 days.
● Think of it as: A temporary insurance slip.
13. Open Policy
● Definition: An insurance policy where the exact value of the insured item is not agreed
upon at the start. The insurance amount represents the maximum the insurer might pay.
The actual value is determined when a loss occurs.
● Think of it as: "We'll figure out the exact value if something happens."
14. Valued Policy
● Definition: A policy that clearly states a specific agreed-upon value for the insured item.
● Think of it as: "This item is worth exactly this much."
15. Running Policy
● Definition: A policy designed for multiple, successive insurances (like for goods being
transported often). It allows the details of what's being insured to be defined over time
through additional statements or endorsements.
● Think of it as: A flexible policy for ongoing or repeated insurance needs.
16. Warranty (Expressed or Implied)
● Definition: A promise or guarantee made in an insurance contract. It can be clearly
stated (expressed) or just understood (implied).
● Think of it as: A specific promise you make to the insurance company about the insured
item or risk.
17. Breach of Warranty
● Definition: The violation of a material (important) warranty or other important part of the
policy by either party, which gives the other party the right to cancel the contract.
● Think of it as: Breaking an important promise made in the insurance contract.
18. Premium
● Definition: The payment owed to the insurer as soon as the insured item is exposed to
the risk. Generally, a policy isn't valid until the premium is paid, with some exceptions like
grace periods for life insurance.
● Think of it as: The money you pay for insurance coverage.
19. Loss
● Definition: The occurrence of the event that is insured against. The insurer is usually
responsible for losses directly caused by the insured peril, but not if the peril was only a
remote cause. They are also not liable if the loss was caused by the insured's willful act.
● Think of it as: When the bad thing you're insured against actually happens.
20. Notice of Loss
● Definition: For fire insurance, you must give written notice to the insurer without
unnecessary delay after a loss. For other non-life insurance, the Commissioner can set a
specific period for this notice.
● Think of it as: Telling your insurance company right away when something happens.
21. Preliminary Proof of Loss
● Definition: When required by a policy, this is the initial evidence you provide to show a
loss has occurred. You don't need court-level proof, just the best evidence you have at
the time. Defects in this proof are waived if the insurer doesn't object promptly.
● Think of it as: Your first set of evidence to show what happened.
22. Double Insurance
● Definition: This happens when the same person has insurance from multiple different
insurance companies for the same subject and the same financial interest.
● Think of it as: Having two or more insurance policies for the exact same thing (like two
car insurance policies for one car from different companies).
23. Reinsurance
● Definition: A contract where one insurer (the reinsurer) takes on some or all of the risk
from another insurer. The original insured person has no direct interest in this contract.
● Think of it as: Insurance for insurance companies, helping them share risk.
24. Marine Insurance
● Definition: This type of insurance covers loss or damage to vessels, cargo, freight, and
other property related to navigation, transit, or transportation. It includes risks of sea
travel, war risks, and personal property floater risks.
● Think of it as: Insurance for ships, boats, cargo, and anything transported by sea or
related to sea travel.
25. Freightage (in Marine Insurance)
● Definition: All the benefits the owner of a ship gets from either chartering the ship
(renting it out) or using it to carry their own goods or goods for others.
● Think of it as: The money or benefits earned from transporting goods or people by ship.
26. Seaworthy (for a ship)
● Definition: A ship is seaworthy when it is reasonably fit to perform its intended service
and to handle the normal dangers of the planned voyage. There's an implied promise
(warranty) that the ship is seaworthy at the start of the risk.
● Think of it as: The ship is in good enough condition and equipped to safely complete its
journey.
27. Casualty Insurance
● Definition: Insurance that covers losses or liabilities from accidents or mishaps. This
excludes losses typically covered by other types of insurance like fire or marine. It
includes things like employer's liability, motor vehicle liability, plate glass, burglary, and
personal accident and health insurance (when offered by non-life companies).
● Think of it as: General accident insurance, covering various unexpected events and
liabilities.
28. Contract of Suretyship
● Definition: An agreement where one party (the surety) promises to guarantee that
another party (the principal or obligor) will fulfill an obligation or undertaking to a third
party (the obligee).
● Think of it as: A promise to back someone up financially if they fail to do what they're
supposed to.
29. Surety
● Definition: The party who guarantees the performance of an obligation in a contract of
suretyship.
● Think of it as: The person or company who gives the guarantee.
30. Principal or Obligor
● Definition: The party whose obligation or undertaking is guaranteed by the surety.
● Think of it as: The person who has to fulfill the obligation.
31. Obligee
● Definition: The third party in whose favor the obligation or undertaking is guaranteed by
the surety.
● Think of it as: The person or entity who benefits from the guarantee.
32. Microinsurance
● Definition: A financial product or service designed to meet the risk protection needs of
low-income individuals. It has specific limits: daily contributions must not exceed 7.5% of
the current daily minimum wage for nonagricultural workers in Metro Manila, and the
maximum guaranteed benefits are not more than 1,000 times that daily minimum wage.
● Think of it as: Very affordable insurance for the poor, with smaller payments and
benefits..
What is Insurance?
● It's a promise: An insurance contract is basically an agreement where one party (the
insurance company, called the "insurer") promises to pay another party (you, the
"insured") money if something specific and bad happens. In return, you pay them a
regular fee called a "premium".
● Why have it? It's about protecting yourself from financial loss, damage, or responsibility
due to unexpected events.
● Who oversees it? There's an "Insurance Commissioner" who makes sure everyone
follows the rules.
What Can (and Can't) Be Insured?
● Anything uncertain: You can get insurance for events that are uncertain, whether they
happened in the past or will happen in the future, as long as you have a financial stake
in it (called an "insurable interest").
● "Insurable Interest" explained: This means you would suffer a financial loss if the
insured event happens.
○ For people: You have an insurable interest in yourself, your spouse and children,
anyone who relies on you financially (like for education or support), or anyone
who owes you money or services where their death or illness could cause a
delay or prevent them from fulfilling their obligation.
○ For property: You have an insurable interest if you own the property, or have a
financial connection to it, and would lose money if it's damaged or lost. This
interest must exist when you buy the insurance and when the loss happens.
● Things you can't insure: You can't insure against things like winning a lottery or any
kind of gambling. Also, "public enemies" cannot be insured.
Important Rules for Your Insurance Policy
● The "Policy" document: This is the written contract that details all the terms of your
insurance. It must clearly state who the parties are, the amount insured, the premium,
what is being insured (property or life), the risks covered, and how long the insurance
lasts.
● Being honest (Concealment and Representation):
○ Concealment: This is when you don't share important information that you know
and should have told the insurance company. If you hide important facts, even by
accident, the insurance company can cancel your contract. Both you and the
insurer must share all important facts truthfully.
○ Representation: These are statements you make when applying for insurance. If
a statement turns out to be false and it's a major detail, the contract can be
canceled.
● Promises (Warranties): These are promises or guarantees made in the insurance
contract. If you break a major promise (a "material warranty"), the other party can cancel
the contract.
● Paying your Premium: Generally, your insurance policy isn't valid until you've paid the
premium. There are some exceptions, like a grace period for life insurance. You might
get your premium back if the insurance never actually started or if the company
committed fraud. However, if you committed fraud, you won't get your premium back.
● Cancellation of Non-Life Insurance: For non-life insurance (like car or house
insurance), the company can cancel your policy for specific reasons, such as not paying
your premium, if you commit a crime that increases the risk, if you commit fraud, or if the
property becomes uninsurable. They must give you written notice beforehand.
What Happens When There's a Loss?
● Notifying the Insurer: If something happens that causes a loss (like a fire), you need to
tell the insurance company in writing without unnecessary delay.
● Who's responsible for the loss? The insurer is usually responsible for losses that are
directly caused by the event you're insured against. However, they won't pay if the loss
was caused by your own intentional actions.
● Total Loss: A total loss means the insured item is completely destroyed or lost. A
"constructive total loss" means the damage is so severe that it would cost too much to fix
it, so you can "abandon" the item to the insurer and claim a total loss.
● Double Insurance: This is when you have more than one insurance policy from different
companies covering the exact same thing and the same financial interest.
I see you've provided a new file: "Title XVI – Pledge, Mortgage and Antichresis (Book IV, Civil
Code) - Law [Link]". This is the correct file for the terms you're interested in!
I will now create a terms and definitions reviewer with at least 20 terms, and then make a
general reviewer, both based on this new file.
Part 1: Terms and Definitions Reviewer (At least 20 terms)
Here are key terms and their definitions from "Title XVI – Pledge, Mortgage and Antichresis
(Book IV, Civil Code)":
1. Pledge
● Definition: A contract by which a debtor delivers a movable (personal property) or
document proving incorporeal rights (like shares of stock) to a creditor, or to a third
person agreed upon, to secure a principal obligation.
● Think of it as: Giving a valuable movable item (like jewelry or a gadget) to someone as
security for a loan.
2. Mortgage (Real Estate Mortgage)
● Definition: A contract whereby the debtor (or a third person) secures the fulfillment of a
principal obligation by creating a real right over immovable property (like land or a
building). The property remains in the possession of the debtor.
● Think of it as: Using land or a building as collateral for a loan, but you keep using the
property.
3. Antichresis
● Definition: A contract where the debtor allows the creditor to receive the fruits (income
or produce) of an immovable property (like rent from a building or harvest from a farm)
and apply them to the interest and then to the principal of a debt.
● Think of it as: Letting your lender use your property's income to pay off your debt.
4. Principal Obligation
● Definition: The main debt or duty that the pledge, mortgage, or antichresis is meant to
secure.
● Think of it as: The main loan or promise that needs to be fulfilled.
5. Pledgor
● Definition: The person who gives their movable property in pledge to secure an
obligation.
● Think of it as: The borrower who hands over an item as security.
6. Mortgagor
● Definition: The person who constitutes the mortgage over their immovable property to
secure an obligation.
● Think of it as: The property owner who uses their land/building as collateral.
7. Creditor
● Definition: The person or entity to whom the debt or obligation is owed.
● Think of it as: The lender.
8. Debtor
● Definition: The person or entity who owes the debt or obligation.
● Think of it as: The borrower.
9. Absolute Owner
● Definition: A requirement for the pledgor or mortgagor, meaning they must completely
own the property they are pledging or mortgaging.
● Think of it as: You must be the true and full owner of the item or property you're using
as security.
10. Free Disposal of Property
● Definition: A requirement that the person constituting the pledge or mortgage must have
the legal right to freely sell or transfer their property. If not, they must be legally
authorized to do so.
● Think of it as: You must have the legal right to use your property as collateral.
11. Alienation (of pledged/mortgaged property)
● Definition: The right to transfer ownership or sell the pledged or mortgaged property for
payment to the creditor if the principal obligation is not fulfilled when due. This is an
essential part of these contracts.
● Think of it as: The lender's right to sell the collateral if the borrower doesn't pay.
12. Indivisibility of Pledge and Mortgage
● Definition: Generally, a pledge or mortgage remains in full force as long as any part of
the principal obligation is outstanding, even if the debt can be divided among heirs or if
there are multiple items pledged/mortgaged. It's not extinguished until the whole debt is
paid.
● Think of it as: The security (pledge/mortgage) covers the entire loan, not just a portion,
until the entireloan is paid off.
13. Pactum Commissorium (Prohibited)
● Definition: A stipulation in a pledge or mortgage contract that states the creditor will
automatically become the owner of the pledged or mortgaged property, or sell it, if the
principal obligation is not paid on time. This is strictly forbidden by law.
● Think of it as: The lender cannot just automatically take ownership of your collateral if
you default; they must go through a legal process (like foreclosure or public sale).
14. Redemption (Right of)
● Definition: The right of the debtor (or other interested parties) to "buy back" the property
that has been foreclosed or sold due to a pledge/mortgage, usually within a specific
period after the sale, by paying the sale price, interest, and costs.
● Think of it as: The right to get your property back after it's been taken as collateral and
sold due to your default, by paying off the debt and related costs.
15. Chattel Mortgage
● Definition: A mortgage that involves movable (personal) property, but unlike a pledge,
the possession of the property remains with the debtor. It is governed by a special law
(the Chattel Mortgage Law).
● Think of it as: Using a movable item (like a car) as collateral, but you keep using the
car. It's like a mortgage, but for personal property.
16. Possession (in Pledge)
● Definition: A key requirement for a pledge is that the movable property must be
physically delivered to the creditor or a third person agreed upon. The creditor holds
possession.
● Think of it as: The lender physically holds the item you gave as security.
17. Public Auction (in Pledge/Mortgage Foreclosure)
● Definition: The legal process by which pledged or mortgaged property is sold to the
highest bidder in a public setting to satisfy the debt, if the debtor fails to pay.
● Think of it as: The collateral being sold publicly to cover the loan.
18. Deficiency (in Sale of Pledged Property)
● Definition: If the proceeds from the public sale of the pledged property are less than the
amount of the debt, the creditor generally cannot recover the difference from the debtor.
The debt is extinguished.
● Think of it as: If the collateral sells for less than the loan amount, the lender usually
cannot ask you for the remaining balance.
19. Excess (in Sale of Pledged Property)
● Definition: If the proceeds from the public sale of the pledged property are more than
the amount of the debt, the debtor is not entitled to the excess, unless otherwise agreed.
● Think of it as: If the collateral sells for more than the loan amount, the extra money
typically goes to the lender, unless there's an agreement otherwise.
20. Fruits of the Property (in Antichresis)
● Definition: The income or produce generated by the immovable property that is subject
to antichresis (e.g., rent from a building, crops from a farm). These fruits are received by
the creditor and applied to the debt.
● Think of it as: The money or goods the property naturally produces.
21. Redemption (in Antichresis)
● Definition: The debtor has the right to reacquire possession and control of the
immovable property by paying off the debt (both principal and interest).
● Think of it as: Getting your property back from the lender after paying your debt, when
the lender was using the property's income.
What are Pledge, Mortgage, and Antichresis?
These are all contracts where someone (a debtor) uses their property to guarantee that they will
pay back a debt or fulfill an obligation to another person (a creditor). They are often called
"security interests."
I. Common Rules for Pledge and Mortgage
These are the fundamental requirements that apply to both Pledge and
Mortgage:
1. To Secure a Debt: Both pledge and mortgage must be set up to guarantee that a main
debt (the "principal obligation") will be paid.
2. Absolute Ownership: The person pledging or mortgaging their property (the "pledgor"
or "mortgagor") must be the complete and true owner of that property.
3. Free Disposal: The pledgor or mortgagor must have the legal right to freely use or sell
their property. If not, they must have special legal permission.
○ Important: Even if someone isn't the debtor, they can still pledge or mortgage
their own property to secure another person's debt.
4. Right to Sell if Debt Not Paid: It's an essential part of these contracts that if the main
debt isn't paid when due, the property used as security can be sold to pay the creditor.
5. Indivisible (Usually): The pledge or mortgage generally covers the entire debt, and
every part of the property covers the entire debt. So, you can't get part of your property
back until the whole debt is paid, even if the debt or property could be divided.
6. No Automatic Ownership (Pactum Commissorium is Forbidden!): The law strictly
forbids any agreement that says the creditor will automatically become the owner of the
pledged or mortgaged property just because the debtor fails to pay the debt on time. The
creditor must go through a legal process (like a public sale or foreclosure) to recover the
debt.
II. Pledge What it is: Using movable property (things you can move, like
jewelry, a car, stocks, etc.) as security, where the debtor delivers
physical possession of the item to the creditor (or a third party they
both agree on).
Key Features of Pledge:
● Property Type: Movable property (including "incorporeal rights" like shares of stock,
which are represented by documents).
● Possession: The creditor must physically possess the item pledged. Without this
transfer of possession, the contract is not a true pledge.
● Public Instrument (for effect against others): To affect people who aren't part of the
contract, the pledge must be recorded in a public document that describes the item
pledged and the date of the pledge.
● No Use of Property (Generally): The creditor cannot use the pledged item without the
owner's permission. If they do, or if they misuse it, the owner can demand it back.
● Sale of Pledged Item: If the debtor doesn't pay:
○ The creditor can sell the pledged item at a public auction.
○ The debtor must be notified of the sale.
○ Important: If the sale proceeds are less than the debt, the creditor generally
cannot collect the remaining balance from the debtor. The debt is considered fully
paid.
○ If the sale proceeds are more than the debt, the debtor is generally not entitled to
the extra money, unless they agreed otherwise.
● Extinguishment of Pledge: The pledge ends when the debt is paid, or when the
creditor returns the pledged item to the debtor.
III. Mortgage
What it is: Using immovable property (things that can't be moved, like
land, houses, buildings) as security for a debt. Unlike pledge, the
debtor keeps possession of the property.
Key Features of Mortgage:
● Property Type: Immovable property (real estate).
● Possession: The mortgagor (debtor) retains possession of the property.
● Registration (for effect against others): For the mortgage to affect third parties, it must
be registered in the Registry of Property. This is a very important step!
● Foreclosure: If the debtor doesn't pay, the creditor must go through a legal process
called "foreclosure" to have the property sold to satisfy the debt.
○ Judicial Foreclosure: Through a court process.
○ Extrajudicial Foreclosure: Through a notary public, if the contract includes a
special power to sell.
● Right of Redemption: After foreclosure, the debtor (or their successors) usually has a
right to "redeem" the property (buy it back) within a specific period (often one year) by
paying the sale price, interest, and related costs.
● Chattel Mortgage: A special type of mortgage for movable property, where possession
remains with the debtor. It's covered by the Chattel Mortgage Law.
IV. Antichresis (Chapter 4)
What it is: A contract where the debtor allows the creditor to receive the "fruits" (income or
produce) from a specific immovable property (like rent from a building, or crops from a farm).
The income received is then applied first to the interest on the debt, and then to the principal
amount of the debt.
Key Features of Antichresis:
● Property Type: Immovable property.
● Creditor's Right to Fruits: The creditor has the right to receive the income/produce
from the property.
● Application of Fruits: The money/goods received must be used to pay off the interest
first, then the principal of the debt.
● Written Form: The amount of the principal and the interest must be clearly stated in
writing for the antichresis contract to be valid.
● Debtor Keeps Ownership: The debtor remains the owner of the property.
● Obligations of the Creditor: The creditor must pay taxes and charges on the property
and cover necessary expenses for its preservation and repair, unless there's an
agreement otherwise. The amount of these expenses should be deducted from the
fruits.
● Remedy for Non-payment: If the debt isn't paid, the creditor cannot automatically take
ownership of the property (Pactum Commissorium is still forbidden). They must pursue
legal remedies, typically by asking the court to order the sale of the property to cover the
debt.
● Redemption: The debtor has the right to demand the return of the property once the
debt has been fully paid, including interest and any expenses incurred by the creditor for
the property.