1. A contract of insurance is a risk distributing device. Illustrate.
Insurance is a contract in which an individual or entity receives financial protection or
compensation from an insurance firm in the form of a policy. The firm pooled the risks of
its clients to make payments more reasonable to the insured. According to the law, A
risk-shifting device is one that contains only the first three aspects listed above, as
opposed to an insurance contract that is inherently risk-distributing, risk-sharing or risk-
policy in nature. Thus, in a guaranty contract, the creditor's interest, which is the
payment of the debt which is subject to impairment if certain contingent events occur,
such as the principal debtor's insolvency, and the creditor's risk is just taken by the
guarantor.
2. Harmonize the concept that an insurance contract is consensual, but it needs the
payment of premium to be perfected.
The concept of contract of insurance is consensual according to the law that the
consideration is the premium, which must be paid on time and in the manner stated in
the policy; if not, the policy will lapse and be forfeited according to its conditions. In this
concept, The validity of the insurance contract is not contingent on meeting any
particular form requirement. The insurer is required to put the contract in writing or any
form of consent, which is known as an insurance policy, and present it to the
policyholder.
3. One of the cardinal principle of insurance is uberrimae fidae. Explain.
As what I’ve understand to the principle of uberrimae fidae stated in the law, it is an
agreement which presented a legal document used in the insurance sector that requires
the greatest level of good faith during the presentation of all material facts that may
affect the other party's decision. Failure to follow uberrimae fidei will result in the
agreement becoming void.
4. What is insurable interest? Differentiate insurable interest in property from life: as
to extent, existence of insurable interest, basis, and what is the insurable interest.
The reasonable concern of a person to get insurance for any individual or property
against unanticipated catastrophes such as death, losses, and so on is known as
insurable interest.
Everyone has a vested insurance in their life and health:
(a) In the case of himself, his spouse, and his children;
(b) Of any person on whom he relies for education or assistance in whole or in part, or
in whom he has a financial interest;
(c) Of any person owing him a legal duty for the payment of money, property, or
services, the fulfilment of which might be delayed or prevented by death or illness; and
(d) Of any person whose life is dependent on any estate or interest vested in him.
On the other hand, An insurable property interest could include: A current interest, A
inchoate interest based on an existing one; or An expectation accompanied by an
existing interest in the source of the expectation.
In terms as to the extent… A carrier or depository of any kind has an insurable interest
in something he holds as such, up to the extent of his liability, but not more than the
value of the thing. The measure of an insurable interest in property is the extent to
which the insured might be damnified by loss or injury thereof.
In terms to existence… An interest in property insured must exist when the insurance
takes effect, and when the loss occurs, but need not exist in the meantime; and interest
in the life or health of a person insured must exist when the insurance takes effect, but
need not exist thereafter or when the loss occurs.
In terms of basis… A change of interest in an insured thing following the occurrence of
an injury that results in a loss has no bearing on the insured's right to indemnity for the
loss, A change of interest in one or more of multiple distinct goods, each of which is
independently insured by a policy, does not preclude coverage for the others. On the
death of the insured, a change of interest by will or succession does not prevent an
insurance; rather, his interest in the insurance goes to the person who takes his interest
in the thing insured.
If you would suffer some type of loss if that person or property were to be lost or
damaged, you have an insurable interest in it. Furthermore, the ongoing presence of
that person or item would benefit you financially. As a result, it would make sense for
you to buy insurance on it so that you can keep receiving those benefits.
5. What are the grounds that an insurance contract could be rescinded? Illustrate
each.
Grounds:
1. The insurer's right to terminate the contract if certain conditions are met after the
non-life policy's effective date. In this instance, the insurer has the authority to
decide whether or not to extend the contract beyond the effective date.
2. Failure to pay a premium, conviction of a crime arising from acts that increase the
hazard insured against, and discovery of fraud or material misrepresentation.
