Life Insurance.docx

Life Insurance ============== Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder)....

Life Insurance ============== Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion. Life, Critical Illness and Disability Underwriting and Claims ============================================================= Critical illness insurance, otherwise known as critical illness cover, or a dread disease policy, is an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy. The policy may also be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation. The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed. The survival period used varies from company to company, however, 14 days is the most typical survival period used. In the Australian market, survival periods are set between 8 -- 14 days. The contract terms contain specific rules that define when a diagnosis of a critical illness is considered valid. It may state that the diagnosis need be made by a physician who specializes in that illness or condition, or it may name specific tests, e.g. EKG changes of a myocardial infarction, that confirm the diagnosis. What is the Difference Between Health Insurance, PhilHealth, and HMO? PhilHealth (Philippine Health Insurance Corporation) PhilHealth is a government-run insurance provider. Compared to private providers, this type of insurance is more affordable. PhilHealth has an established insurance program that provides financial assistance to Filipino citizens who are employed or otherwise, and in need of medical attention or surgery. If you are an employee, half of your monthly contribution will be shouldered by your employer and the other half will be deducted from your salary. Senior citizens aged 60 and over are automatically covered by PhilHealth, and recently, the Republic Act 11228 has been passed, which means Persons with Disabilities in the country will also receive special benefits from PhilHealth. HMO (Health Maintenance Organizations) HMO are private organizations providing healthcare insurance to members. Their difference from private health insurance is that they have a network of doctors and healthcare providers. Their members can only avail of the benefits from those within that network. The plans that are offered by HMOs are often customizable but there is usually a limit to how much financial assistance you can get in a year. The higher the premium you are paying, the bigger your annual allowance will be, too. There are several HMO providers in the country but the most popular ones are Maxicare and MediCard. HMO membership is usually provided by private companies to their employees on top of their PhilHealth contribution. Health Insurance ================ Unlike HMOs that off access to a limited network of healthcare providers, private health insurance companies offer access to a more extensive network. It is not that common for companies to offer this type of insurance as a part of their benefits package, although there are a few that do. Private health insurance premiums can be a little pricey. They are fully paid for by individuals voluntarily if they want to be insured. If you want your family members to be covered, that would be at an additional cost. Note that this only applies to immediate family members. These private health insurance companies are comparable to international ones and some of their policies still apply even when the insured member is out of the country. The most well-known private health insurance providers in the country include Manulife, PRU Life U.K., and Sun Life. +-------------+-------------+-------------+-------------+-------------+ | | | | | | +-------------+-------------+-------------+-------------+-------------+ | | | | | | +-------------+-------------+-------------+-------------+-------------+ | | | | | | +-------------+-------------+-------------+-------------+-------------+ | | | | | | +-------------+-------------+-------------+-------------+-------------+ | | | | | | +-------------+-------------+-------------+-------------+-------------+ | | of or | deduction | | | | | | from | | | +-------------+-------------+-------------+-------------+-------------+ | What | The | Policy | May earn | | | happens in | contributio | defaults | dividends | | | case policy | n | after the | that are | | | is not used | goes to | calendar | | | | in a year | PhilHealth | year | withdrawabl | | | or contract | Fund | whether | e | | | period | | annual | | | | | | limit is | | | | | | consumed | | | +-------------+-------------+-------------+-------------+-------------+ Incontestability Clause ======================= Insurance Code Section 48. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. Generally, a contract may be invalidated if the consent by one party was obtained by mistake or fraud. The incontestability clause in the Insurance Code is an exception. A life insurance policy is incontestable after two (2) years from the date of issuance. Life insurance is a contract between an insured and an insurer. The insurer agrees to pay the insured's designated beneficiary upon the occurrence of the insured individual's death or other event, covered by the policy such as terminal or critical illness. In return, the insured agrees to pay a stipulated amount called premium, at regular intervals or in lump sums. Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R. No. 175666, July 29, 2013. FACTS: On July 3, 1993, Delia (insured) took out a life insurance policy from Manila Bankers Life Insurance Corporation (Bankers Life/insurer), designating Cresencia, her niece, as her beneficiary. The insurer then issued the written instrument in which a contract of insurance is set forth (Policy) with a face value of P100,000.00, in Delia's favor after the requisite medical examination and payment of the insurance premium. When the insurance policy had been in force for more than two (2) years and seven (7) months, Delia died. Her niece eventually filed a claim on the insurance proceeds. The insurer conducted an investigation into the claim, and came out with the following findings: - Delia did not personally apply for insurance coverage, as she was illiterate; - Delia was sickly since 1990; - Delia did not have the financial capability to pay the insurance premiums; - Delia did not sign the July 3, 1993 application for insurance; and - Cresencia was the one who filed the insurance application, and designated herself as the beneficiary. For the above reasons, the insurer denied Cresencia's claim and refunded the premiums paid on the policy. The insurer filed a civil case for the rescission and/or annulment of the policy on the ground that the policy was obtained by fraud, concealment and/or misrepresentation under the Insurance Code. For her defense as the beneficiary, Cresencia reasoned out that the insurer can no longer question the validity of the insurance policy on the ground of prescription. Can the Bankers Life deny the claim of the Cresencia on the insurance proceeds? The law says: NO. The insurer is given two (2) years -- from the effectivity of a life insurance contract and while the insured is alive -- to discover or prove that the policy is void from the beginning or is rescindable by reason of fraud, concealment or misrepresentation of the insured or his agent. After the two-year period lapses, the insurer must make good on the policy. This means that the beneficiary is entitled to the claim on the insurance proceeds. The insurer cannot deny the claim except by reason of non-payment of premiums. What if the insurance policy was obtained by fraud, concealment, or misrepresentation of the insured or his agent? The Supreme court says: The insurer, still, must make good on the policy even though the policy was obtained by fraud, concealment, or misrepresentation. This is the so-called "incontestability clause" which precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two (2) years during the insured's lifetime. Take note that the insurance policy was in force for a period of more than two (2) years. Considering that Delia, the insured, died after the two-year period, Bankers Life is barred from proving that the policy is void from the beginning by reason of the Delia's fraudulent concealment or misrepresentation. Thus, to reiterate, Bankers Life cannot deny the claim of the beneficiary. Suicide Clause ============== Insurance Code Section 183. 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 (2) 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. PROBLEM: In January 2016, Mr. H was issued a life insurance policy by XYZ Insurance Co., wherein his wife, Mrs. W, was designated as the sole beneficiary. Unbeknownst to XYZ Insurance Co., however, Mr. H had been previously diagnosed with colon cancer, the fact of which Mr. H had concealed during the entire time his insurance policy was being processed. In January 2019, Mr. H unfortunately committed suicide. Due to her husband\'s death, Mrs. W, as beneficiary, filed a claim with XYZ Insurance Co. to recover the proceeds of the late Mr. H\'s life insurance policy. However, XYZ Insurance Co. resisted the claim, contending that: 1. The policy is void ab initio because Mr. H fraudulently concealed or misrepresented his medical condition, i.e., his colon cancer; and 2. as an insurer in a life insurance policy, it cannot be held liable in case of suicide. Rule on each of XYZ Insurance Co.\'s contentions. ANSWER: XYZ Insurance Co.'s contentions are untenable. On concealment or misrepresentation, Section 48 of the Insurance Code provides that the insurer has 2 years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After 2 years, the defenses of concealment or misrepresentation, no matter how well founded, no longer lie. This is known as the Incontestability Clause. The life insurance policy in question was issued in January 2016. Three (3) years had elapsed when Mr. H, the insured, died in January 2019; therefore, the incontestability clause applies. On the liability of the insurer in case of suicide, Section 183 of the Insurance Code provides that the insurer shall be liable in such case if: (1) suicide was committed after the policy has been in force for a period of 2 years from the date of issue or its last reinstatement; or (2) suicide committed in a state of insanity, regardless of the date of the commission of suicide. The policy has been in force and subsisting for 3 years as above-mentioned. Based on the foregoing, insurer cannot avoid liability in paying the proceeds to Mrs. W, the beneficiary.