Insurance Code1. Concept of InsuranceKnowledge and Recall:

Although the business is not formally designated as one of insurance and no profit is derived or no separate or direct consideration is received, it is deemed to be doing an insurance business, if it undertakes any of the following circumstances, EXCEPT:

A. making or proposing to make, as insurer, any insurance contract.B. making or proposing to make, as guarantor, any contract of guaranty as a vocation

and not as a mere incident to any other legitimate business of a guarantor.C. doing any insurance business, including a reinsurance business.D. doing or proposing to do any business in substance equivalent to any of the above.

An insurance business consists of which of the following undertakingsA. making or proposing to make, as insurer, any insurance contractB. making or proposing to make, as surety, any contract of suretyship which is

incidental to any other legitimate business or activity of the suretyC. doing any kind of business, including a reinsurance businessD. all of the aboveE. a and b onlyF. a and c only G. b and c only

Understanding:Which of the following cannot be the object of a contract of insurance?A. ship which had already sunkB. ticket in a lottery C. life of your debtorD. chartered ship

Which of the following is true regarding a contact of insurance?A. Not a contract of chance although the event against the occurrence of which it is

intended to provide may never occurB. Only the insurer takes the riskC. It depends upon an event which is uncertain, but which is to occur at a determinate

timeD. All of the aboveE. a and b onlyF. a and c onlyG. b and c only

Analysis:

2. Elements of an Insurance ContractKnowledge and Recall:

Insurable interest in life insurance includesA. himself, of his spouse, and of his children.B. any person on whom he depends wholly or in part for education or support, or in

whom he has pecuniary interest.

C. A and B D. none

Understanding:A ship which had already sunk may still be insured against becauseA. the sinking was a contingent past event.B. the sinking is a contingent future event.C. the sinking was an unknown past event. D. the sinking was an unknown future event.

Analysis:

3. Characteristics/Nature of Insurance ContractsKnowledge and Recall:

An aleatory contract is one where A. one of the parties or both reciprocally bind themselves to give or to do something in

consideration of what the other shall give or do upon the happening of an event which is certain, or which is to occur at an indeterminate time.

B. it depends upon some contingent event.C. not a contract of chance although the event against the occurrence of which it is

intended to provide may never occur.D. B and C

A contract of Insurance is a contract of indemnity in that:A. no person may secure insurance upon property in which he has interestB. the promise of the insurer is to make good only the loss of the insured C. it contemplates a possible gain to the insured by the happening of any eventD. all of the above

Understanding:How should insurance contracts be interpreted when there its terms are doubtful?A. strictly against the insurer and liberally in favor of the insured B. liberally against the insurer and strictly in favor of the insuredC. strictly against the insured and liberally in favor of the insurerD. liberally against the insured and strictly in favor of the insurer

If a person whose property is insured sells or transfers it to another:A. the subsequent transferee becomes the real parties to the contract, where the

insurance is “on account of the owner” or “for whom it may concern” or where “the loss is payable to bearer”

B. the buyer can be his successor if the sale is with the consent of the insurerC. the buyer can be his successor if by express stipulation of the parties, the contract is

made to run with the property of the transfereeD. all of the above E. a and b onlyF. a and c onlyG. b and c only

Analysis:

4. Classesa. MarineKnowledge and Recall:

Abandonment, in marine insurance, is made by giving notice thereof to the insurer, which may be done

A. orally or in writing and must be explicit. B. orally or in writing and need not be explicit.C. in writing only and must be explicit.D. in writing only and need not be explicit.

Inland marine insurance covers:A. land or over the land transportation perils of property shipped by railroads, motor

trucks, airplanesB. risks of lake, river, or other inland waterway transportationC. risk connected with navigation, to which a ship, cargo, freightage, profits or other

insurable interest in movable property, may be exposed during a certain voyage or a fixed period of time

D. all of the aboveE. a and b only F. a and c onlyG. b and c only

Understanding:The following rules generally apply only in marine insurance, EXCEPT: A. rules on constructive total loss.B. rules on co-insurance.C. rules on abandonment.D. rules on notice of loss.

A person insured by a contract of marine insurance may abandon the thing insured in which of the following circumstances:

A. if three-fourths thereof in value is actually lostB. if three-fourths thereof in value would have to be expended to recover it from the

perilC. if it is injured to such an extent as to reduce its value to more than three-fourths D. if the thing insured is a ship, and the contemplated voyage cannot be lawfully

performed without incurring either an expense to the insured of at least three-fourths the value of the thing abandoned or a risk which a prudent man would not take under the circumstances

E. all of the above

Analysis:

b. FireKnowledge and Recall:

A ______ is one where the fire escapes from the place where it was intended to burn and ought to be. In this case, the insurer is __________.

A. friendly fire; liableB. friendly fire; not liableC. hostile fire; liable D. hostile fire; not liable

“Fire insurance” covers loss by:A. fireB. lightningC. windstormD. tornado E. earthquake F. all of the above

Understanding:Which of the following statements, in relation to alterations entitling the insurer to re -

scind a fire insurance contract, is TRUE?A. If the policy does not contain any prohibition limiting the use or condition of the

thing insured, an alteration in said use or condition does not constitute a violation of the policy. The contract is not affected by such alteration even though it increases the risk and is the cause of the loss.

B. An alteration in the use or condition of the thing, which increases the risk, consti-tutes a violation of the policy even if the policy does not contain any prohibition limiting such use or condition.

C. An alteration in the use or condition of the thing, which increases the risk and is the cause of the loss, constitutes a violation of the policy even if the policy does not contain any prohibition limiting such use or condition.

D. If the policy does not contain any prohibition limiting the use or condition of the thing insured, an alteration in said use or condition does not constitute a violation of the policy. The contract is not affected by such alteration even though it increases the risk, except if it is the cause of the loss.

An alteration in the use or condition of the thing insured in a contract of fire insurance:A. entitles the insurer to rescind the contract if the use of the property is changed

without increasing the risk of lossB. does not entitle the insurer to rescind the contract even if such alteration increases

the risk provided no provisions were violatedC. entitles the insurer to rescind if the materials prohibited from being used are

necessary and ordinarily used in the insured’s business D. all of the above

Analysis:

c. CasualtyKnowledge and Recall:

Casualty insurance is insurance covering loss or liability arising from accident or mishap, including the following, EXCEPT:

A. Plate gloss insuranceB. Burglary and theft insuranceC. health insurance as written by life insurance companies D. health insurance as written by non-life insurance companies

Casualty insurance coversA. loss or liability arising from accident or mishapB. employer’s liability insuranceC. motor vehicle liability insuranceD. plate glass insuranceE. burglary and theft insuranceF. all of the above

Understanding:Which of the following events can be considered “intentional”, hence the insured

cannot recover from a casualty insurance?A. insured played with his gun which accidentally firedB. insured was purposely shot by a burglar C. insured joined a boxing match; his head was hit, causing his instantaneous death D. insured joined a wrestling match; he then slipped, which caused his death

X obtained a Personal Accident Insurance Policy issued by Y Insurance for 100K. Three months later he was dead with a bullet wound on his head. X’s death was caused when he was playing with his handgun which fired. His wife sought payment on the policy. Can the wife recover?

A. No. X willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy.

B. Yes. there was suicide therefore insurer is liable.C. No. X was negligent and thus wife is not entitled to recovery.D. Yes. X did not intentionally expose himself to danger. X’s death was caused by an

accident within the limits set forth in the policy and therefore not exempt from the liability of the insurer

Analysis:

d. SuretyshipKnowledge and Recall:

When does acceptance of the bond makes suretyship contract binding?A. Acceptance by the obligee of the bond provided the premium has been paid.B. Acceptance by the obligee of the bond notwithstanding non-payment of premium. C. Acceptance by the insured of the bond provided the premium has been paid.D. Acceptance by the insured of the bond notwithstanding non-payment of premium.

Contract of suretyship includes:A. official recognizancesB. stipulationsC. bonds D. undertakings

E. all of the above F. none of the above

Understanding:What rule/s should be observed in determining the extent of liability of the surety to the

obligee in case of non-performance by the obligor?A. All the properties of the obligor must be exhausted first before going against the

obligee.B. The liability of the surety or sureties shall be joint with the obligor and shall be

limited to the amount of the obligor’s liability to the obligee.C. The liability of the surety or sureties shall be joint and several with the obligor and

shall be limited to the amount of the bond.D. The liability of the surety or sureties shall be joint with the obligor and shall be

limited to the amount of the bond.`Which of the following is true regarding a contract of suretyship?A. liability of the surety or sureties shall be joint and several with the obligorB. liability of the surety shall be limited to the amount of the bondC. liability is determined strictly by the terms of the contract in relation to the principal

contract between the obligor and the obligeeD. contract of suretyship shall be deemed to be an insurance contract, only if made by

a surety who or which is doing an insurance businessE. all of the above

Analysis:

e. LifeKnowledge and Recall:

The right to receive the proceeds of life insurance policies shall follow the following order:

I. Father and mother, if livingII. Grandfather and grandmother; or ascendants nearest in degree, if living;III. Surviving spouseIV. Legitimate children;V. Collateral relativesVI. StateVII. Illegitimate children

A. IV, I, II, VII, III, V, VI B. IV, I, II, III, VII, V, VIC. IV, II, I, VII, III, V, VID. I, IV, VII, II, V, III, VI

A kind of policy where the insurer binds himself to pay a fixed sum to the insured if he survives for a specified period (maturity date stated in the policy), or if he dies within such period, to some other person indicated.

A. Pure Endowment PlanB. Limited Payment Plan

C. Endowment Plan D. Whole Life Plan

Understanding:When the beneficiary dies before the insured, the proceeds of the life insurance shall go

to theA. estate of the insured.B. estate of the beneficiary.C. estate of the beneficiary, if such beneficiary is irrevocable, even if the proceeds

were made payable to the beneficiary “only if living”.D. estate of the insured, if such beneficiary is revocable.

Analysis:

f. Compulsory Motor Vehicle Liability InsuranceKnowledge and Recall:

The no-fault clause in a Compulsory Motor Vehicle Liability Insurance is a clause that allows the victim an option to file a claim for ____________, ________ the necessity of proving fault or negligence of any kind.

A. death only; withoutB. injury only; withoutC. death or injury; withD. death or injury; without

In a Compulsory Motor Vehicle Insurance, notice of claim must be filed within what period?

A. one year from the accidentB. one month from the accidentC. 6 years from the accidentD. 6 months from the accident E. none of the above

Understanding:Under the no-fault clause in a Compulsory Motor Vehicle Liability Insurance, in case of

losses, the proper insurer from which to claim isA. in case of a passenger: insurer of the vehicle in which the occupant is riding,

mounting or dismounting from.B. in case of a third party: in case of an occupant: insurer of the directly offending

vehicle.C. in case of an occupant: insurer of the vehicle in which the occupant is riding,

mounting or dismounting from.D. in case of an occupant: insurer of the directly offending vehicle.

Z, while driving his truck accidentally bumped Y, causing injuries to the latter totaling P25,000. The vehicle was covered by a Compulsory Motor Vehicle Liability Insurance issued by X Insurance Corporation for P15,000. Y sued Z and X for the damage sustained. Which of the following is correct?

A. Y can recover from X P25,000, on the ground that the liability of the insurance company is direct, primary and solidary.

B. Y can recover P15,000 from X. C. Only Z is liable.D. Y can recover P12,500 each from X and Z since the Insurance Code does not provide

for a solidary obligation, thus the presumption is that the obligation is joint.

Analysis:

5. Insurable Interesta. In Life/HealthKnowledge and Recall:

An interest in __________ insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime’ and interest in _________ insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

A. property or health; lifeB. property; life or health C. health; property or lifeD. life; property or health

Which of the following is true regarding insurable interest in life/health:A. must exist when the insurance takes effect and when the loss occurs, but need not

exist in the meantime B. the beneficiary in life insurance need not have any insurable interestC. every person has an insurable interest in the life and health on any person on

whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest

D. all of the aboveE. a and b onlyF. a and c onlyG. b and c only

Understanding:Which of the following statements is the most accurate?A. The beneficiary designated in a life insurance policy need not have any interest in

the life of the insured.B. The beneficiary designated in a life insurance policy must have an interest in the life

of the insured.C. The beneficiary designated in a life insurance policy need not have any interest in

the life of the insured, but if the owner of the policy insures the life of another and designates a third party as a beneficiary, both the owner and beneficiary must have an insurable interest in the life of the cestui que vie.

D. The beneficiary designated in a life insurance policy must have an interest in the life of the insured, but if the owner of the policy insures the life of another and designates a third party as a beneficiary, only the owner must have an insurable interest in the life of the cestui que vie.

X, married to Z, took out a life insurance and named Y, his common-law partner as his beneficiary. Upon the death of X, Z filed a claim with the insurance company. Can Z recover?

A. No. Y, the beneficiary of the insurance contract is entitled to the proceeds.B. Yes. Life insurance is void.C. Yes. Y is disqualified from being named beneficiary. D. none of the above

Analysis:

b. In PropertyKnowledge and Recall:

An insurable interest in property may consist in:A. an existing interest. B. an inchoate interest founded on an existing interest.C. an expectancy, coupled with an existing interest in that out of which the expectancy

arises.D. A, B, and C

An insurable interest in property may consist in:A. an existing interest B. an inchoate interest founded on an existing interestC. an expectancy, coupled with an existing interest in that out of which the expectancy

arisesD. all of the above E. a and b onlyF. a and c onlyG. b and c only

Understanding:Which of the following statements is the most accurate?A. In property insurance, interest of the insured over the property must exist both at

inception and at time of loss, but not in the meantime. Hence, the death of the insured before the property covered was consumed by fire will cause the forfeiture of the proceeds of a fire insurance policy, notwithstanding if the insured has any heirs.

B. In property insurance, interest of the insured over the property must exist at inception only and need not exist at time of loss. Hence, in case of death of the insured before the property covered was consumed by fire, the proceeds of the policy will pass to his estate.

C. In property insurance, interest of the insured over the property must exist both at inception and at time of loss, but not in the meantime. But, in case of the insured’s death, there will be a change of interest and the fire insurance policy will pass to his heirs. Hence, his heirs can recover from the policy.

D. In property insurance, interest of the insured over the property must exist at inception only and need not exist at time of loss. Hence, in case of death of the insured before the property covered was consumed by fire, the proceeds will pass to his beneficiary.

In which of the following instances will there be no suspension of insurance notwithstanding change in the interest in any part of the property insured:

A. change in interest after the occurrence of an injuryB. change of interest in one or more of several distinct things, separately insured by

one policyC. change of interest by will or successionD. transfer of interest by a partner, joint owner, or owners in common to another

partner or common ownerE. all of the above F. none of the above, a change in interest in property insured without change of

interest in the insurance always suspends the insurance.

Analysis:

c. Double Insurance and Over InsuranceKnowledge and Recall:

Which of the following statements about over-insurance is false?A. The amount of the insurance is beyond the value of the insured’s insurable interest.B. In case of loss, the insurer is bound to pay only up to the extent of the real value of

the property lost.C. There may be only one insurer involved.D. There must be more than one insurer involved.

This exists where the same person is insured by several insurers separately in respect in the same subject and interest

A. double Insurance B. over InsuranceC. reinsuranceD. mutual insuranceE. over insurance by double insurance

Understanding:When there is over insurance by double insurance, the insured can claim in case of loss

up to:A. the amount for which the insurers are severally liable under their respective

contracts. Where the policy under which the insured claims is a valued policy, the valuation for any sum received by him under any other policy with regard to the actual value of the subject matter insured.

B. the amount for which the insurers are severally liable under their respective contracts. Where the policy under which the insured claims is a valued policy, the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured.

C. the amount for which the insurers are jointly liable under their respective contracts. Where the policy under which the insured claims is a valued policy, the valuation for any sum received by him under any other policy with regard to the actual value of the subject matter insured.

D. the amount for which the insurers are jointly liable under their respective contracts. Where the policy under which the insured claims is a valued policy, the valuation for

any sum received by him under any other policy without regard to the actual value of the subject matter insured.

When there is over insurance by double insurance, the insurer:A. may claim payment from the insurers in such order as he may select, up to the

amount for which the insurers are severally liable under their respective contractsB. in case of valued policy, must give credit as against, the valuation for any sum

received by him under any other policy without regard to the actual value of the subject matter insured

C. must give credit , as against the full insurable value, for any sum received by him under any other policy

D. all of the above E. a and b onlyF. a and c onlyG. b and c only

Analysis:

d. Multiple or Several Interests on Same PropertyKnowledge and Recall:

In an open mortgage or loss payable mortgage clause, in case of loss, the mortgagee is entitled to recover up to the extent of

A. the amount of the loss.B. the amount agreed upon by him and the mortgagor.C. face value of the policy.D. his credit.

Understanding:Which of the following statements about open mortgage clause is true? A. The mortgagor does not cease to be a party to the insurance contract. B. The mortgagor ceased to be a party to the insurance contract.C. The mortgagor receives the proceeds of the policy.D. The mortgagor does not have an interest in the insurance contract.

A mortgaged his property to B worth P2M to secure the payment of a loan amounting to P500,000. A obtained an insurance on his property for his own benefit. Which of the following is correct:

A. both A and B has insurable interest on the property to the extent of the value of the property.

B. in case of loss of the property, B is entitled to the proceeds of the insurance.C. in case of loss of the property, proceeds won’t go to B who has no greater right than

unsecured creditors.D. none of the aboveE. a and b onlyF. a and c onlyG. b and c only

Analysis:

6. Perfection of the Contract of Insurancea. Offer and Acceptance/Consensuality(1) Delay in acceptanceKnowledge and Recall:

An insurance contract is consensual and is therefore perfected the moment A. there is a meeting of minds with respect to the object and the cause or

consideration. B. the insured paid the premium, notwithstanding the fact that the insurer rejected

the application.C. the happening of the event insured against.D. the insurance policy is delivered to the insured.

Understanding:When the insured submitted an application to which the insurer responded by sending

him a counter-proposal to his offer, an insurance contract is thenA. perfected.B. not yet in existence. C. consummated.D. perfected but not yet binding.

A applied for insurance with B Company naming C, his favorite son as beneficiary. Unfortunately, A died before the application was processed. B company was found to be negligent for the delay in the processing of the application. Which of the following is correct?

A. contract is perfected since the delay is due to the negligence of B companyB. insurer liable to the estate of the deceased applicant C. insurer liable to CD. none of the aboveE. a and b onlyF. a and c onlyG. b and c only

Analysis:

(2) Delivery of PolicyKnowledge and Recall:

Delivery of the insurance policy is important because A. it is an evidence of the execution of the insurance contractB. it is a communication of the insurer’s acceptance of insured’s offer.C. it is essential for the validity of the insurance contract.D. A and B

Which of the following is true regarding delivery of policy?A. actual delivery is essential to the perfection of contractB. where delivery is unconditional, insurance becomes effective at the same time as

deliveryC. where delivery is unconditional, the policy is still effective notwithstanding unpaid

premiums at the time and manner specified in the policy

D. none of the above

Understanding:If the insurance contract stipulates that it is perfected only upon delivery of the policy,

delivery to __________ perfects the contract.A. insured himselfB. insured’s agentC. A and B D. none of the above

Z applied for a life insurance with A Company partially paying the first annual premium. Z and A Company agreed that should the policy be issued, the same be delivered to X, Z’s brother who will complete the payment for the first annual premium. The approved policy was delivered to X on December 18, 2011. However, before the policy was delivered to Z, he died on December 19, 2011. Which of the following is correct?

A. policy was not perfected, actual delivery to Z is necessaryB. policy has no effect, notice of acceptance to the applicant is necessaryC. delivery to X is valid D. none of the above

Analysis:

b. Premium PaymentKnowledge and Recall:

Unless and until the premium has been paid, no contract of insurance is valid and binding, EXCEPT:

A. in the case of a life or an industrial life policy whenever the grace period provision applies.

B. agreement to grant the insured credit extension for the payment of the premium.C. when there is an agreement allowing the insured to pay premium in installment and

partial payment has been made at the time of the loss.D. A, B, and C

In which of the following instances will there be a valid and binding contract of insurance notwithstanding unpaid premiums?

A. agreement allowing the insured to pay premium in installment and partial payment has been made at the time of the loss

B. in case of life or industrial life policy whenever the grace period appliesC. acknowledgement in a policy or contract of insurance of the receipt of premiumD. all of the above E. None. Sec 77 provides that no policy or contract of insurance issued by an insurance

company is valid and binding unless the premium thereof has been paid.

Understanding:Where an insurer authorizes an insurance agent or broker to _______________, it is

deemed to have authorized said agent to receive the premium in its behalf. A. deliver a policy to the insured B. negotiate with the insured

C. A and BD. none of the above

Analysis:

c. Non-Default Options in Life InsuranceKnowledge and Recall:

One of the non-default options in life insurance is the paid-up insurance, in which caseA. the policy is continued in force from date of default for a time either stated or equal to the

amount of the net value that may be purchased.B. the insured is given the right, upon default, the option to make the policy continued for

the whole period of insurance without further payment of premiums. C. the insured is given the right to claim the amount less than the reserve, reduced by

surrender charge.D. the insured may reinstate the policy at anytime within 3 years from date of default,

unless the cash surrender value is already paid or the extension has already expired.

This is an option available to the insured where upon default, insurer lends/advances to the insured without any need of application on his part, amount necessary to pay overdue premium, but not to exceed the cash surrender value of the policy:

A. Automatic Premium Loan B. Extended Insurance C. Paid-up Insurance D. Term insuranceE. Automatic Paid-up Insurance

Understanding:In life insurance, the availability of cash surrender value gives rise to the policy loan privilege

under which the insurer will advance on the security of the contract an amount that will not exceed the guaranteed cash value. The cash surrender value is available after

A. payment of 3 full annual premiums. B. payment of 3 annual premiums, be it partial or full.C. payment of 2 full annual premiums.D. payment of 2 annual premiums, be it partial or full.

Analysis:

d. Reinstatement of a Lapsed Policy of Life InsuranceKnowledge and Recall:

What is/are the requisite/s for reinstatement of a lapse policy of life insurance to apply?A. It is done within 2 years from date of default.B. It is done within 3 years from date of default.C. It is done within 2 years from date of default and the cash surrender value is not yet paid

or the extension has not yet expired.D. It is done within 3 years from date of default and the cash surrender value is not yet paid

or the extension has not yet expired.

What are the requisites for the reinstatement of an individual life or endowment insurance policy?

A. exercised w/in 5 years from defaultB. insured need not present evidence of insurability satisfactory to the companyC. Cash Surrender Value has been duly paid and the extension period has not yet

expiredD. all of the aboveE. none of the above

Understanding:In case of reinstatement of a life insurance policy, may the insurer demand for a higher

premium payment?A. Yes, reinstatement serves as a novation to the old contract.B. Yes, the insurer has the freedom to change some stipulations of the contract.C. No, it does not create a new contract, it merely revives the old policy. D. No, the insurer must first get the insured’s approval of the increase.

What is the effect of reinstatement?A. creates a new contractB. insurer cannot require higher premium than amount stipulated in the contractC. revives the old policyD. none of the aboveE. a and b onlyF. a and c onlyG. b and c only

Analysis:

e. Refund of PremiumsKnowledge and Recall:

In the following circumstances, return of premiums to the insured is warranted, EXCEPT:A. if the thing insured was never exposed to the risks insured against. B. contract is voidable due to the fraud or misrepresentation of insured or his agent. C. contract is voidable because of the existence of facts of which the insured was

ignorant without his fault.D. when rescission is granted due to the insurer’s breach of contract.

Understanding:Rescission of an insurance contract always leads to refund of premiums to the insured.A. True, since the insured can no longer expect to receive the proceeds in case of loss.B. False, if the rescission was due to the insured’s breach, he cannot recover. C. True, since rescission cannot be done unless a party returning to the other what he

has received by virtue of the contract. D. False, since rescission always leads to non-refund of premiums to the insured.

Analysis:

7. Rescission of Insurance Contracts

a. ConcealmentKnowledge and Recall:

Matters that must be communicated even in the absence of inquiry includes:A. matters not material to the contract.B. matters which the other has not the means of ascertaining the said facts. C. matters as to which the party with the duty to communicate makes a warranty.D. B and C

What is the effect of concealment?A. contract is voidable B. insurer must prove fraud in order to rescind the contractC. duty of communication of material facts is dependent on the intentionD. a and b onlyE. a and c onlyF. b and c only

Understanding:Concealment which is material and _____________ entitles the injured party to rescind

the contract of insurance.A. intentionalB. unintenionalC. made in good faithD. all of the above

In 2008, A was issued a life insurance non-medical policy insurance for P1Million designating his father as beneficiary. In his application he concealed his heart ailment. He died of a car accident in 2008. Which of the following is correct?

A. the insurance company is not liable B. beneficiary is entitled to the proceeds C. contract of insurance may be rescinded on the ground of concealmentD. none of the aboveE. a and b onlyF. a and c onlyG. b and c only

Analysis:

b. Misrepresentation/OmissionsKnowledge and Recall:

Which of the following is true regarding representation in insurance contract?A. may be oral or writtenB. may be made at the time of, or before, issuance of the policyC. a representation may be altered or withdrawn before the insurance is effected, but

not afterwards.D. A, B and C

In the following circumstances, the insurer will NOT be entitled to rescission notwithstanding misrepresentation:

A. when the insurer accepts premium payments despite knowledge of the misrepresentation

B. insured has no personal knowledge of the matter in question and such information proceeds from the agent of the insured

C. unintentional misrepresentationD. all of the aboveE. a and b onlyF. a and c onlyG. b and c only

Understanding:The insured represented to the insurer his belief about a certain matter which is

material to the risk. His belief is true at the time it was made/represented but false at the time the contract takes effect. Can the insurer rescind the contract?

A. No, because it was true at the time it was represented.B. Yes, because it was false at the time it was represented.C. No, because it was only a representation of belief. D. Yes, because the misrepresentation was material to the risk

Z was issued a life insurance non-medical policy insurance for P500,000 designating his mother as beneficiary. In his application he falsely answered questions on the application form regarding his health and medical history. He died of a plane crash. Which of the following is correct?

A. the insurance company may rescind the contractB. claim of beneficiary should be granted since the misrepresentation was irrelevant to

the cause of deathC. the information which the insured misrepresented was material and relevant to the

approval and issuance of the policyD. none of the aboveE. a and b onlyF. a and c only G. b and c only

Analysis:

c. Breach of WarrantiesKnowledge and Recall:

In case of a breach of warranty, the general rule is that the insurer has the right to rescind the insurance contract, with the following exceptions, EXCEPT:

A. loss occurs before the time of performance of the warranty.B. the performance becomes unlawful.C. the performance becomes unreasonable. D. the performance becomes impossible.

Understanding:Will the insurer be exonerated if the insured breached a warranty, notwithstanding the

fact that the loss was not caused by such breach? A. No, for the insurer to be exonerated, the breach must be the cause of the loss.

B. Yes, the insurer is exonerated, whether or not the loss was caused by such breach.C. It depends whether or not the warranty breached was a material provision in the

policy.D. None of the above

Analysis:

8. Claims Settlement and Subrogationa. Notice and Proof of LossKnowledge and Recall:

______________ is the formal evidence given the insurance company by the insured or claimant under a policy of the occurrence of the loss, the particulars and the data necessary to enable the company to determine its liability and the amount.

A. Notice of lossB. Proof of loss C. Evidence in chiefD. Primary evidence

Understanding:What type/s of insurance require/s notice of loss, wherein failure to give notice will

defeat the right of the insured to recover?A. all kinds of insurance B. all kinds of insurance, provided there is a stipulation in the policy requiring the

insured to do soC. fire insurance (even if there is no stipulation in the policy requiring the insured to do

so) and all other types of insurance, provided there is a stipulation in the policy requiring the insured to do so

D. marine insurance (even if there is no stipulation in the policy requiring the insured to do so) and all other types of insurance, provided there is a stipulation in the policy requiring the insured to do so

Analysis:

b. Guidelines on Claims Settlement(1) Unfair Claims Settlement; SanctionsKnowledge and Recall:

The following are instances of unfair claims settlement done by an insurance company, EXCEPT:

A. knowingly or negligently misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue.

B. failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policies.

C. not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear.

D. compelling policyholders to institute suits to recover amounts due under its polices by offering without justifiable reason substantially less than the amounts ultimately recovered in suits brought by them.

Understanding:In insurance, an unfair claim settlement can be committed by a/an A. policy holder.B. Insurer. C. Beneficiary.D. all of the above

Analysis:

(2) Prescription of ActionKnowledge and Recall:

A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than ___________ from the time when the cause of action accrues, is _____________.

A. 6 months; voidableB. 6 months; void C. 1 year; voidableD. 1 year; void

Understanding:A stipulation stating that the prescriptive period for filing an action is 1 year from the

happening of loss is void. As the stipulation is void, the time limit for filing an action arising from the insurance contract is _______ from the time the cause of action accrues.

A. 10 years B. 5 yearsC. 4 yearsD. 1 year

Analysis:

(3) SubrogationKnowledge and Recall:Which of the following is NOT true about subrogation in insurance contracts?

A. There is a need of a formal assignment or an express stipulation in the policy. B. The insurer can only recover from the third person what the insured could have

recovered. C. There can be no recovery if the insurer voluntarily paid even if the loss is not

covered by the policy.D. The insured can no longer recover from the offender what was paid to him by the

insurer but he can recover any deficiency, that is, if his damages are more than what was paid.

Understanding:Subrogation is not possible in ________________ insurance.A. fireB. marineC. liability

D. life

Analysis: