LIFE INSURANCE
) A mutual agreement by which a party agrees to pay a
Section 181. Life insurance is insurance on human lives
and insurance appertaining thereto or connected
therewith.
Every contract or undertaking for the payment of
annuities including contracts for the payment of lump
sums under a retirement program where a life insurance
company manages or acts as a trustee for such retirement
program shall be considered a life insurance contract for
purposes of this Code.
Section 182. An insurance upon life may be made payable
on the death of the person, or on his surviving a specified
period, or otherwise contingently on the continuance or
cessation of life.
Every contract or pledge for the payment of endowments
or annuities shall be considered a life insurance contract
for purposes of this Code.
In the absence of a judicial guardian, the father, or in the
latter’s absence or incapacity, the mother, of any minor,
who is an insured or a beneficiary under a contract of life,
health, or accident insurance, may exercise, in behalf of
said minor, any right under the policy, without necessity
of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does
not exceed Five hundred thousand pesos (P500,000.00) or
in such reasonable amount as may be determined by the
Commissioner. Such right may include, but shall not be
limited to, obtaining a policy loan, surrendering the
policy, receiving the proceeds of the Policy, and giving
the minor’s consent to any transaction on the policy.
In the absence or in case of the incapacity of the father or
mother, the grandparent, the eldest brother or sister at
least eighteen (18) years of age, or any relative who has
actual custody of the minor insured or beneficiary, shall
act as a guardian without need of a court order or judicial
appointment as such guardian, as long as such person is
not otherwise disqualified or incapacitated. Payment
made by the insurer pursuant to this section shall relieve
such insurer of any liability under the contract.
LIFE INSURANCE DEFINED
1.) Insurance payable on the
a.) Death of a person
b.) On his surviving a specified period
c.) Otherwise contingently on the continuance or
cessation of life
2.
given sum on the happening of a particular event
contingent on the duration of human life, this is in
consideration of the payment of a smaller sum
immediately, or in periodical payments by the other
party.
PARTIES INVOLVED IN A POLICY OF LIFE
INSURANCE
1.) The owner of the policy
2.) The person whose life is the subject of the policy
3.) The beneficiary
NOTE: one person might occupy all three postions.
NATURE OF LIFE INSURANCE
1.) Liability absolutely certain
- In ordinary life insurance, the event upon which
the payment is to be made is absolutely certain to
happen at some future time, provided that the
policy remains in effect. In the average case, the
insurer only pays back the money that has been
given to him to hold in quasi trust for the insured
plus interest and less expenses. Only in the case
of premature death does the insurance payment
embrace the element of indemnity.
2.) Amount of insurance generally without limit
- Another reason why life insurance may not be
regarded as a contract of indemnity exists in the
difficulty to be encounters in fixing any sort of
pecuniary value upon life.
- There is no limit as to the amount of insurance
which may legally be placed upon the life of any
person even though that person might be one
whose life was rather a burden upon the party in
interest than a benefit possessing a pecuniary
value.
3.) Life policy is a valued policy
- Life insurance policies are valued by the
purchaser when the policy is purchased and the
value placed on the insures is basically decided by
the amount the purchaser who is willing to pay
the requisite premiums. The amount is
determined by the factors affecting the life of the
insured such as his age, health, and occupation.
4.) Direct pecuniary loss not required
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 - A life policy is not a mere contract of indemnity,
but is more accurately characterized as a form of
investment on contrast to the indemnity purpose
of property insurance. As a result, it is sufficient
that the purchaser of a life insurance policy had
an insurable interest in the life of the insured at
the time the policy is issued.
- The life insurance contract agrees to pay a certain
stated amount rather than an amount determined
after the loss to be a repayment for the loss.
Under the Rules of Court: all moneys, benefits, privileges, or
annuities accruing or in any manner growing out of any life
insurance are exempt from execution regardless of the amount
of the annual premiums paid.
Incidentally, it has been held that statutes exempting proceeds
of life insurance from claims of creditors are regarded as
exemption laws, and not as part of the insurance laws of the
State, and should be construed liberally in the light of, and to
give effect thereto.

LIFE INSURANCE DISTINGUISHED FROM FIRE APPLICATION OF EXEMPTION TO ACCIDENT

AND MARINE INSURANCE INSURANCE

LIFE INSURANCE
Investment
Valued Policy
May be transferred or
assigned to any person
even if he has no insurable
interest.
Consent of the insurer is
not essential to the
validity of the assignment
of a life policy
Insurable interest in the
life or health of the person
insured need not exist
after the insurance takes
effect or when the loss
occurs
Insurable interest need
not have any legal basis
Contingency that is
contemplated is a certain
event
Liability of the insurer to
make payment is certain
Cannot be cancelled by
the insurer
Loss can seldom be
measured accurately in
terms of cash value
The beneficiary is under
no obligation to prove
actual financial loss as a
result of the death of the
insured in order to collect
the insurance
EXEMPTION OF LIFE INSURANCE POLICIES
FROM EXECUTION
FIRE INSURANCE 1.) When accident insurance regarded as life
AND MARINE insurance
INSURANCE
Contract of indemnity - When one the risks insured in the latter is the
Open or Valued death of the insured by accident, then such
Must have an insurable accident insurance may also be regarded as a life
interest insurance.
- Exemption in the Rules of Court, as it states “any
life insurance” applies to ordinary life insurance
Consent is essential contracts, as well as to those which although
intended primarily to indemnify for risks arising
from accidents.
Insurable interest must exist 2.) Burden of proof
not only when the insurance
takes effect but also when
- In an accident insurance, the insured’s beneficiary
the loss occurs
has the burden of proving that the cause of death
is due to the covered peril. Once the fact is
established, the burden then shifts to the insurer
Must have a legal basis
to show any excepted peril that may have been
stipulated. (it lies with the claimant of the
May or may not occur insurance proceeds to initially prove that the loss
is caused by the covered peril)
The amount insured may
KINDS OF LIFE INSURANCE POLICIES
not have been paid
May be cancelled by either
party 1.) Ordinary life policy
May be measured
- Insured is required to pay a certain fixed premium
annually or at more frequent intervals throughout
Required to submit proof his entire life and the beneficiary is entitled to
receive payment under the policy only after the
death of the insured.
- An alternative form of payment, however, can
come about by the inclusion of an investment
feature through the payment of the “cash
surrender value” of the policy in case it is
cancelled by the owner or it lapses through
nonpayment of premiums.

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 2.) Limited payment life policy (Limited premium
insurance policy)
- Is one under the terms of which the premiums
are payable only during a limited period of years,
usually 10, 15, or 20. When the specified number
of premium payments have been made, the
insurance is fully paid for.
- If the insured should die within the specified
period, his beneficiary is entitled to all the
proceeds of the policy without any liability for the
unpaid premiums.
2.) Health, accident, and disability insurance
- Provides benefits for hospital or medical
expenses, or for loss of time or earning power
because of injury or illness.
- While health insurance is written by life insurers,
injury and illness are also viewed as casualties,
that is, both as life and non-life insurance; hence,
such policies may be issued by either life or non-
life insurance companies.
CONTRACT OF ANNUITY DEFINED

3.) Endowment policy “by the aleatory contract of life annuity, the debtor binds
himself to pay an annual pension or income during the life of
- One under the terms of which the insurer binds one or more determinate persons in consideration of a capital
himself to pay a fixed sum to the insured if he consisting of money or other property, whose ownership is
survives for a specified period, or if he dies within transferred to him at once with the burden of the income.”
such period, to some other person indicated.
- This kind of policy differs from the limited CONCEPT
payment life policy in that in the case of the latter,
the policy is paid only upon the death of the For his premium, the purchaser of an annuity expects his
insured. Here, the insured stands a chance of insurer to pay him a periodic income as long as he lives. Under
being paid the proceeds of the policy while still a life insurance contract, the insurer starts paying upon the
alive. death of the insured, whereas under an annuity contract, the
- The proceeds on maturity can be paid either in a insurer stops paying upon the death of the insured.
lump sum or as an annuity. This type represents
both term insurance and a form of annuity.
ANNUITY CONTRACTS DISTINGUISHE FORM
ORDINARY LIFE POLICIES
4.) Term insurance policy
ANNUITY CONTRACT ORDINARY LIFE
- Is one which provides coverage only if the POLICIES
insured dies during a limited period.
Insures against economic Rather than an early death
- If the insured dies within the period specified, the problems resulting from a long
policy is paid to the beneficiary. If he survives the
life
period, the contract terminated or expires at the
Looks to transiency Looks to longevity
end of the time period.
The lump sum is paid to the Insured pays to the
- This kind of insurance is also known as
insurer immediately insurer an annuity and his
temporary insurance. It is essentially pure
and the annuitant beneficiary receives at the
insurance; it provides life insurance alone. It has
receives the annuity insured’s death the lump
no investment value.
payments as long as sum payment
he lives
SCOPE OF LIFE INSURANCE Appears to be an investment Characteristics akin to
indemnity
1.) Life insurance

- The loss occasioned by death against which life

insurance attempts to provide protection is the
cessation of the current earning power of the
insured. The permanent loss of current earning
capacity amounts to an “economic death”
a.) Actual death – represents “casket death”
b.) Living death – permanent disability
c.) Retirement death – Living beyond the period of
earning capacity
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.
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LIABILITY OF INSURER IN CASE OF SUICIDE
1.) When liable
a.) The suicide is committed after the policy has
been in force for a period of two years from the
date of its issue or of its last reinstatement
b.) The suicide is committed after a shorter period
provided in the policy
c.) The suicide is committed in the state of insanity
2.) When not liable
a.) Suicide is not by reason of insanity and is
committed within the 2 year period
b.) The suicide is by reason of insanity but is not
assumed by the insurer regardless of the date of
commission
c.) The policy was obtained with the intention to
commit suicide
Section 184. A policy of insurance upon life or health may
pass by transfer, will or succession to any person, //
whether he has an insurable interest or not, // and such
person may recover upon it whatever the insured might
have recovered.
RIGHT OF INSURED TO ASSIGN LIFE
INSURANCE POLICY
1.) Insurable interest of assignee in life insurance not
required
A provision in a contract of life insurance denying the
insured his right to assign without the consent of the
insurer will be void.
a.) to deny the right to assign a life insurance policy
except to a person having an insurable interest is
to diminish appreciably the investment value of
the contract to the owner.
b.) By requiring an incipient insurable interest, the
law restricts the class of persons who may profit
from the death of the insured thereby reducing to
a reasonably safe minimum the dangers of
wagering and murder.
c.) Since he may name any beneficiary he pleases in
policy taken out by him, an assignment of the
policy by him would not be invalidated by the
lack of insurable interest of the assignee.
2.) Where assignment used as a cloak to hide an
illegal scheme
The usual evidence of this scheme is the fact that the
assignment occurred almost immediately after the
policy was issued.
NECESSITY OF CONSENT OF BENEFICIARY TO
ASSIGNMENT
1.) With waiver of right to change beneficiary
- In accordance with the rule that a beneficiary of
an ordinary life insurance policy which contains
an express waiver of the right to change the
beneficiary acquires a vested and absolute interest
which cannot be divested without his consent
2.) Without such waiver
- Where the policy contains no such waiver, the
insured may assign the policy without the consent
of the beneficiary.
Section 185. Notice to an insurer of a transfer or bequest
thereof is not necessary to preserve the validity of a policy
of insurance upon life or health, unless thereby expressly
required.
1.) Notice not required
- If the policy does not expressly require the
insured to give notice of an assignment or
transfer of the policy
2.) Notice required by policy
- Where notice to the insurer is required by the
provisions of the policy, an assignment without
such notice, in the absence of waiver, shall have
no effect so far as the insurer is concerned.
3.) Assignment with consent of insurer
- The assignment with the consent of the insurer
creates, in effect, a novation. The assignee takes
the newly formed contract free of defenses
available to the insurer against the insured under
the old contract.
Section 186. Unless the interest of a person insured is
susceptible of exact pecuniary measurement, the measure
of indemnity under a policy of insurance upon life or
health is the sum fixed in the policy.
MEASURE OF INDEMNITY UNDER LIFE POLICY
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 - Strictly speaking, there could be no exact
pecuniary measurement of a person’s interest in
his life or the life of another. Hence a person can
purchase life insurance for any amount as long as
he can pay the premium.
Exception: when a person insures the life of
another, as where a creditor insures the life of
his debtor. In this case, the interest of the
creditor in the “life of the debtor” is
susceptible of exact pecuniary measurement
or estimation.
CASES:
Biagtan vs. The Insular Life Assurance Company
GR No. L-25579
March 29, 1972
FACTS:
Juan S. Biagtan was insured with defendant Insular Life
Assurance company for the sume of P5,000 and, under a
supplementary contract denominated “Accidental Death
benefit Clause” for and additional sum of P5,000 if the “The
death of thee insured resulted directly from bodily injury
effected solely through external and violent means
sustained in an accident .. and independently of all other
causes.” The clause, however expressly provided that it
would not apply where the death resulted from an injury
“intentionally inflicted by another party.”
On the night of May 20, 1964, or during the first hours of the
following day a band of robbers entered the house of the
insured Juan S. Biagtan, in the course of the said robbery, the
latter died from the thrusts made by the robbers to the body
of the insured.
Plaintiffs, as beneficiaries of the insured, filed a claim under the
policy. The insurance company paid the basic amount of
P5,000 but refused to pay the additional sum of P5,000
under the accidental death benefit clause, on the ground
that the insured’s death resulted from injuries
intentionally inflicted by third parties and therefore was
not covered.
ISSUE:
Whether or not the petitioners are entitled to the said
proceeds under the accidental death benefit clause.
HELD: NO
It should be noted that the exception in the accidental benefit
clause invoked by the appellant does not speak of the purpose
– whether homicidal or not – of a third party in causing the
injuries, but only of the fact that such injuries have been
“intentionally” inflicted – this obviously to distinguish them
from injuries which, although received at the hands of a third
party, are purely accidental. This construction is the basic idea
expressed in the coverage of the clause itself, namely, that “the
death of the insured resulted directly from bodily injury
effected solely through external and violent means
sustained in an accident. And independently of all other
causes.” Where a gang of robbers enter a house and coming
face to face with the owner, even if unexpectedly, stab him
repeatedly, it is contrary to all reason and logic to say that his
injuries are not intentionally inflicted, regardless of whether
they prove fatal or not. As it was, in the present case they did
prove fatal, and the robbers have been accused and convicted
of the crime of robbery with homicide.
Sun Insurance Office LTD vs. CA and Nerissa Lim
GR No. 92383
July 17, 1992
FACTS:
The petitioner issued Personal Accident Policy to Felix Lim, Jr.
with a face value of P200,000. Two months later, he was dead
with a bullet wound on his head. As beneficiary, his wife
Nerissa Lim sought payment on the policy but her claim was
rejected. The petitioner agreed that there was no suicide. It
argued, however that there was no accident either.
According to the Assistant of Lim, the latter was in a happy
mood and was playing with his handgun, from which he had
previously removed the magazine. As she watched television,
he stood in front of her and pointed the gun at her. She pushed
it aside and said it might be loaded. He assured her it was not
and then pointed it to his temple. The next moment there was
an explosion and Lim slumped to the floor. He was dead
before he fell.
ISSUE:
Whether or not the event is considered to be an accident
making the petitioner liable.
HELD: YES
The words “accident” and “accidental” have never acquired
any technical signification in law, and when used in an
insurance contract are to be construed and considered
according to the ordinary understanding and common usage
MNM II 5
and speech of people generally. In substance, the courts are
practically agreed that the words “accident” and “accidental”
mean that which happens by chance or fortuitously, without
intention or design, and which is unexpected, unusual, and
unforeseen.
An accident is an event which happens without any
human agency or, if happening through human agency,
an event which, under the circumstances, is unusual to
and not expected by the person to whom it happens. It
has also been defined as an injury which happens by
reason of some violence or casualty to the injured without
his design, consent, or voluntary co-operation.
In light of these definitions, the Court is convinced that the
incident that resulted in Lim’s death was indeed an accident.
The petitioner contends that the insured willfully exposed
himself to needless peril and thus removed himself from the
coverage of the insurance policy. By the mere act of pointing
the gun to his temple, Lim had willfully exposed himself to
needless peril and so came under the exception. The theory is
that a gun per se is dangerous and should therefore be handled
cautiously in every case.
As the secretary testified, Lim had removed the magazine from
the gun and believed it was no longer dangerous. He expressly
assured her that the gun was not loaded. It is submitted that
Lim did not willfully expose himself to needless peril when he
pointed the gun to his temple because the fact is that he
thought it was not unsafe to do so. The act was precisely
intended to assure Nalagon that the gun was indeed harmless.
Calanoc vs. CA and The Philippine American Life
Insurance
GR No. L-8151
December 16, 1955
FACTS:
Melencio Basilio was watchman of the Manila Auto Supply
located at the corner of Avenida Rizal and Zurbaran. He
secured a life insurance policy from the Philippine American
Life Insurance Company in the amount of P2,000 to which was
attached a supplementary contract covering death by
accident. On January 25, 1951, he died of a gunshot wound
on the occasion of a robbery committed in the house of Atty.
Ojeda at the corner of Oroquieta and Zurbaan streets. Virginia
Calanoc, the widow, was paid thee sum of P2,000 face value of
the policyn but when she demanded the payment of the
additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main
defense, that the deceased died because he was murdered by a
person who took part in the commission of the robbery and
while making an arrest as an officer of the law which
contingencies were expressly excluded in the contract and have
the effect of exempting the company from liability.
It is contended in behalf of the company that Basilio was killed
which “making an arrest as an officer of the law” or as a result
of an “assault or murder” committed in the place and therefore
his death was caused by one of the risks excluded by the
supplementary contract which exempts the company from
liability.
ISSUE:
Whether or not the death of Basilio is covered under the
supplementary contract, making the respondent liable.
HELD: YES
In volunteering to extend help under the situation, he might
have thought, rightly or wrongly, that to know the truth was in
the interest of his employer it being a matter that affects the
security of the neighborhood. No doubt there was some risk
coming to him in pursuing that errand, but that risk always
existed it being inherent in the position he was holding. He
cannot therefore be blamed solely for doing what he believed
was in keeping with his duty as a watchman and as a citizen.
And he cannot be considered as making an arrest as an officer
of the law, as contended, simply because he went with the
traffic policeman, for certainly he did not go there for the
purpose nor was he asked to do so by the policeman.
While the act may not excempt the triggerman from liability
for the damage one, the fact remains that the happening was a
pure accident on the part of the victim. The victim could gave
been either thee policeman or Atty. Ojeda for it cannot be
pretended that the malefactor aimed at the deceased precisely
because he wanted to take his life.
We take note that these defenses are included among the risks
excluded in the supplementary contrat which enumerates the
cases which may exempt the company from liability. While as
a general rule “the parties may limit the coverage of the
policy to certain particular accidents and risks or causes
of loss, and may expressly except other risks or causes of
loss therefrom” however, it is to be desired that the terms and
phraseology of the exception clause be clearly expressed so as
to be within the easy grasp and understanding og the insured,
for if the terms are doubtful or obscure the same must of
necessity be interpreted or resolved against the one who has
caused the obscurity.
MNM II 6