Requirements of an Insurance Policy
Section 51. A policy of insurance must specify:
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
What must a policy contain and what are the reason behind such requirements?
A policy must contain:
1. Names of the parties
2. Amount of insurance
Ø to easily and exactly determine the amount of indemnity to be paid in case of loss or damage. This requirement however can be dispensed with in cases of open or running policies.
3. Rate of premium
Ø Because the premium represents the consideration of the contract; these rates are developed on the basis of the nature and character of the risk assumed. Remember Atty. Quimson’s famous words? As the risk increases, the rate of premium also increases.
4. Property or life or thing insured
Ø Constitutes the Subject Matter
5. Interests of the insured in the property
Ø In order to determine actual damage. Remember, an owner gets the full value of the loss while a mortgagee gets only the value of his credit.
6. Risks insured against
Ø In order to know when the insurer is called to indemnify the insured, because if this is NOT stated, and you hold the insurer liable for any loss due to any cause whatsoever, it will result to a big loss on the part of the insurer.
7. Duration of the insurance
Ø This period signifies the life of the policy. If the duration of insurance has already ended, it can no longer be revived.