Insurance - General Provisions PDF

Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _____...

Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ Lesson Title: INSURANCE – GENERAL PROVISIONS Materials: Lesson Objectives: Student Activity Sheet At the end of this module, I should be able to: 1. Define insurance contract. References: 2. State the legal concept, elements and subject matter of The Insurance Code of the insurance contract. Philippines by Hector De Leon 3. Describe the nature and characteristics of insurance contracts 4. Identify the parties to the contract of insurance. 5. State the perfection of the contract of insurance. Productivity Tip: Your ability to stay focused is a critical factor in your success or failure. Getting things done is important, and focus is the key to getting things done. For starters, set your timer to 45 minutes. Commit yourself to totally avoiding any distractions until the timer alarms. Have a 5-minute break after. Then, repeat again until you are done with this module. Happy learning! A. LESSON PREVIEW/REVIEW 1) Introduction (2 mins) Not everyone may appreciate the importance of an insurance but it is a known and accepted fact that insurance plays an important role in securing the financial wellbeing of individuals as well as businesses. Insurance matters for individuals because it serves as protection for the insured and his family. Insurance reduces the impact of unforeseen tragedies like injury, illness, permanent disability and even death. It affords peace of mind knowing that the family will receive financial assistance from the insurance. Businesses are expose to risks of financial losses even in the normal course of carrying its transactions. A delivery business has a high risk of being involved in road accidents. If one of its delivery vehicles hits a pedestrian, it needs to pay for the damage it may have caused. There are business activities that have the potential to affect stakeholders in costly ways and business insurance protects the business financially from some of these risks. There are businesses that are more vulnerable than others. Some business mishaps can easily wipe out the assets of a small business. 1 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ 2) Activity 1: What I Know Chart, part 1 (3 mins) You may be a bit surprised to see that you are being asked to do Activity 1! In your mind, you might want to ask, how can I answer Activity 1 when in fact we do not have any discussions yet! The purpose of this activity is to know if you have any idea about the questions being asked. There is no wrong or right answer in Activity 1. This is also a tool for both of us to see what you know before starting and after you have finished working on this module! That way, we can assess if you learned something! Now, try to answer the What I Know Part. Again, there is no right or wrong answer! What I Know Questions: What I Learned 1. Define insurance contract. 2. State the things which can be a subject matter of insurance. 3. Give 3 characteristics of insurance contracts. 2 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ B. MAIN LESSON 1) Activity 2: Pre-Printed Content Notes (13 mins) DEFINITION AND LEGAL CONCEPT OF INSURANCE CONTRACT: Republic Act No. 10607 is a Decree which is known as “The Insurance Code”. It provides for the meaning of contract of insurance. Section 2. A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent ever. From the definition, it is understood that an insurance contract is an agreement by which one party (insurer) for a consideration (premium) paid by the other party (insured), promises to pay money or its equivalent or to do some act valuable to the insured or its beneficiaries, upon the happening of a loss, damage, liability or disability arising from an unknown or contingent event. ACTS CONSTITUTING “DOING AN INSURANCE BUSINESS”: 1. Making or proposing to make, as insurer, any insurance contract; 2. Making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; 3. Doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; 4. Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. ELEMENTS OF INSURANCE CONTRACTS: Like any other contracts, an insurance contract must have the following elements: 1. Consent –there must be an offer and acceptance and the parties must have the legal capacity. 2. Cause or Consideration – the consideration for an insurance contract is the premium paid by the insured. 3. Object and purpose – the principal object and purpose of insurance is the transfer and distribution of risk of loss, damage or liability arising from unknown or contingent event. Additional Element: Insurable Interest – this means that the insured possesses an interest of some kind susceptible of pecuniary estimation. It means that the insured will be the one to suffer loss or damage from its destruction, termination or injury by the happening of the event insured against. 3 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ SUBJECT MATTER OF INSURANCE CONTRACTS: 1. In General – anything that has an appreciable pecuniary value, which is subject to loss or deterioration may be a subject matter of insurance. 2. Property Insurance – insurance on the property that is primarily involved. In fire and marine insurance, the thing insured is property 3. Life, Health and Accident Insurance – insurance where subject matter is generally in reference to the insured as a party to the contract. In life, health or accident insurance, it is the life or health of the person that is the subject of the contract 4. Casualty Insurance – Insurance (not falling within the scope of the other types of insurance) against perils which may affect the person or property of the insured and give rise to liability on his part to pay damages to others, the subject mater is the risks involved or the insured risk of loss or liability, that he may suffer loss or be compelled to indemnify for the loss suffered by a third person. In casualty insurance, it is the insured’s risk of loss or liability What may be insured? 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. NATURE AND CHARACTERISTICS OF AN INSURANCE CONTRACT: 1. Consensual – because it is perfect by the meeting of the minds of the parties. 2. Voluntary – in a sense that it is generally not compulsory and the parties may incorporate such terms and conditions as they may deem convenient. However, there are insurance that may be required by law in certain instances such as for motor vehicles and employees. 3. Aleatory - because it depends upon some contingent event. 4. Contract of Indemnity - (except life and accident insurance where the result is death) because the promise of the insurer is to make good only the loss of the insured. PARTIES TO THE CONTRACT OF INSURANCE 1. Insurer The party who assumes or accepts the risk of loss and undertakes for a consideration to indemnify the insured or to pay him a certain sum on the happening of a specified contingency or event. 4 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ Every corporation, partnership or association, duly authorized to transact insurance business as elsewhere provided in this Code, may be an insurer. 2. Insured The person in whose favor the contract is operative and who is indemnified against or is to receive a certain sum upon the happening of a specified contingency or event. Anyone except a public enemy may be insured. In order that a person may be the party insured, he must be competent to enter into contract and must possess an insurable interest in the subject of the insurance. A juridical person, like a partnership or a corporation, may take out insurance on property owned by it. PERFECTION OF THE CONTRACT OF INSURANCE: A mere offer or proposal of insurance contract does not constitute perfection of contract. The contract of insurance, being a consensual contract is perfected upon meeting of the minds of the parties to the contract. Meeting of the minds is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. 2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking) Exercise I 1. What may be insured? Describe each. ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ 2. When is contract of suretyship considered as insurance contract? Explain. ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ 3. How do we determine the existence of an insurance contract? Explain. ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ _______________________________________. 5 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ 3) Activity 4: What I Know Chart, part 2 (2 mins) It’s time to answer the questions in the What I know chart in Activity 1. Log in your answers in the table. 4) Activity 5: Check for Understanding (5 mins) Exercise I. TRUE or FALSE __________1. Making or proposing to make, as insurer, any insurance contract is considered as doing an insurance business. __________2. The fact that no profit is derived from the making of insurance contracts shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. __________3. Consideration for an insurance is called premium. __________4. The object of the contract is the transfer and distribution of risk of loss, damage or liability arising from an unknown or contingent event. __________5. The insurance contract is aleatory because it is perfected by mere consent. __________6. If the insured has no insurable interest, the contract is void and unenforceable as being contrary to public policy. __________7. Insurer is the person in whose favor the contract is operative and who is indemnified against. __________8. A foreign or domestic insurance company or corporation may be an insurer. __________9. Anyone may be insured. __________10. Juridical person may take insurance on property they owned. A. LESSON WRAP-UP Activity 6: Thinking about Learning Congratulations for finishing this module! Shade the number of the module that you finished 6 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ Did you have challenges learning the concepts in this module? If none, which parts of the module helped you learn the concepts? ________________________________________________________________________________________ ________________________________________________________________________________________ ______________________________. Some question/s I want to ask my teacher about this module is/are: ________________________________________________________________________________________ ________________________________________________________________________________________ ______________________________. Learning Scores Action Plan Date Target/Topic What module# did you What contributed to the quality of your What were your What’s the do? What were the performance today? What will you do next scores in the date today? learning targets? What session to maintain your performance or activities? activities did you do? improve it? FAQs The fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. 7 FLM 1.0  Course Code: BAM 200 Module #1 Name: ________________________________________ Class number: __________________ Section: _________ Schedule: _____________________ Date: _________________________ If the insured has no insurable interest, the contract is void and unenforceable as being contrary to public policy. It is basic that all provisions of the insurance policy should be examined and interpreted in consonance with each other. The various stipulations in the policy shall be interpreted together. In case of doubt as to the terms in the contract, the cardinal principle of insurance law is to interpret it favorably to the insured. The consent of the spouse is not necessary for the validity of an insurance policy taken out by a married person on his/her life or that of his/her children. The contract of insurance entered into by a minor is voidable. A contract of insurance is a contract of indemnity and is not a wagering or gambling contract. Beneficiary is the person designated by the terms of the policy as the one to receive the proceeds of the insurance. 8 FLM 1.0