INSURABLE INTEREST

In general – benefit or suffer in case of loss or preservation

INURABLE INTEREST LIFE – when the continuation of life, there will be material
advantage
If no insurable interest – unenforceable
Classes of insurance on life: own life and another person
Blood relationship is not enough (must be those only in Section 10)
See Art. 105 for those required to give support – though this law enumerates
blood relationship, there is insurable interest not out of blood but out of obligation
to support
Creditor may insure debtor, provided unpaid, but cant be the other way around
INSURABLE INTEREST IN PROPERTY
Existing, inchoate founded on existing, or expectancy w/ existing
Existing – title or interest e.g. unpaid vendor on goods in transit (equitable
interest), lessee, depositary
Hence, insurable interest when:
1. Legal title
2. Equitable title
3. Qualified property or possessory right
4. Right of possession
5. He will suffer from loss from destruction (e.g. building contractor insured the
building he constructed)
Inchoate – e.g. shareholder as to corp. properties, purchaser judicial sale subject
to redemption
Expectancy – heir CANNOT have insurable interest since the properties do not yet
exist
DISTINCTION LIFE VS. NON LIFE – Insurable interest in property is limited to the
property value, such must exist both at time of loss and perfection (perfection ra
sa life) and beneficiary must have insurable interest

INSURABLE INTEREST BAILEE

Carrier may be damnified for loss of goods, amount recovered = extent of liability
INSURABLE INTEREST IN MORTGAGE – Both mortgagee (as to value of debt) and
mortgagor have (value of property)
Mortgagor may make mortgagee as the beneficial payee by:
1. Make him assignee of the policy
2. Mere pledgee
3. Make a rider
4. Use of standard mortgage clause
5. Giving mortgagee an equitable lien
6. Loss payable clause
SUBROGATION
Upon payment of loss, insurer is subrogated
INSURABLE INTEREST OVER FINANCE LEASE – both lessee (due to possession) and
lessor (due to legal title) have
TIME WHEN INSURABLE INTEREST MUST EXIST –
Property – both at time of loss and at perfection (dili until perfection ha)
Hence if there is alienation in the meantime, policy is suspended and inoperative.
Change in interest in the property does not suspend when:
1. Happens after occurrence of loss
2. Several things separately insured
3. Succession
4. Change from one partner to another if jointly insured
5. Co-owner to another co-owner
LIFE INSURANCE – not a contract of indemnity, insurable interest only at
perfection
INSURABLE INEREST OF BENEFICIARY IN PROPERTY – not longer needed if
assignment happens after loss
PREMIUM
Elixir vitae of insurance
Entitled to payment when the thing insured is exposed to peril insured against
If no payment – not valid
If stopped payment – considered lapsed
Though consensual, obligation of insurer arises only after payment
But exceptions to nonpayment hence binding-
1. Grace period
2. Installments
3. Credit extension
4. Equitable estoppel – where insured relied in good faith on a practice of
extension of credit
Hence even if in fact no premium was yet paid but there was agreement,
obligation will be in force. But insured must still pay
Salary deductions for govt. employees – there must be agreement
Surety – liable even if obligee has not yet paid premiums provided he accepted the
bond
HOW TO PREVENT LAPSE OF LIFE INSURANCE
1. Grace period
2. Automatic policy loan – policy’s cash surrender value is used to pay
premiums (CSV – amount given upon surrender of policy)
3. Application of dividend – in case of participating insurance
4. Reinstatement – law: may be reinstated at anytime w/in 3 years from default
unless CSV was paid od extension period has expired
RETURN OF PREMIUM:
1. Thing was not exposed to the peril insured
2. Surrender of time policy before agreed time
3. Voidable
4. Fraud or misrepresentation of insurer or agent
5. Insured never incurred liability
6. Overinsurance by several insurers
May pay premiums in advance
Automatic assignment clause is invalid since contrary to public policy