Insurance is a contract, whereby one party, for

a consideration, agrees to indemnify the other

party, against loss, damage or liability arising
out of an unknown or contingent event.
1. two parties- the insurer and the insured
2. consideration-premium paid by the insured
to the insurer.
3. to indemnify-to shoulder for the losses of
the insured.
4. It is the transfer of risk from the insured to
the insurer.

We need first to understand the risk.
RISK?? - PANGANIB
- It is the possibility of something going
wrong.
- It is uncertain when and where it will strike
but you know it can happen.

- PERIL- causes of loss
- HAZARD- something that increases the
likelihood or severity of loss
Ex. Your house has the risk of catching fire.
Especially if it is made of wood

Ex. Your car has the risk of being bumped by
the another vehicle every time you drive it,
especially if the car is ill-maintained.

Ex. Your cargo runs the risk of being lost
along with the vessel during bad weather
especially if the vessel is old.
1. Insurable Interest
2. Utmost Good Faith
3. Indemnity
4. Subrogation
5. Contribution
6. Proximate Cause
Insurable interest is the legal right to insure
The legal relationship to the property
I NSURABLE I NTEREST
A person has the insurable interest if he/she
stands to gain if the subject matter of the insurance
is preserved or if he/she stands to suffer to loss if it
is damaged or lost.
All contracts of insurance must be negotiated with
utmost good faith that applies to the insurer and the
insured. The duty of disclosure has to be observed by both
parties through out the negotiation, during the currency of
the policy and the stage of renewal. The disclosure must be
material to the terms and conditions of the policy contract.
UTMOST GOOD FAI TH
The contract of insurance is essentially built on TRUST.
Example 1:

A property declared as
residential house.
Later on converted as
RTW factory

A Motor Car that is
declared for Private Use
But is actually used for
hire
Example 2:
Indemnity is payment made for a certain
loss or damage.
In insurance, the Principle of Indemnity is that
by which an insured is compensated for losses
sustained and placed as much as possible in the
same pecuniary position before the misfortune.
2. Reinstatement - repair or restoration to the
original state as possible.
METHODS OF I NDEMNI TY
1. Monetary Payment payment of the cash
equivalent of the property lost.
CONTENTS
3. Replacement replacing the lost article with a
similar or the same article.
SUBROGATI ON
The Subrogation Principle arises from the principle of
Indemnity.
Subrogation is allowing the insured to collect the
claim from the insurance company where he/she is
insured. In effect, the insurance company is
responsible to recover all expenses paid to their
insured, or to the person responsible to the accident or
to his insurer.
Example:
CGAC
Insured Vehicle
Assured
1. An accident occurs and caused physical damages to both vehicles.
2. The assured files a claim to CGAC.
3. CGAC indemnifies the assured for the damages.
4. CGAC will then recover from the other party for damaged parts etc..
CONTRI BUTI ON
An insured may effect two or more insurance for
the same subject matter of insurance. But in the event
of loss, he can recover under each of these policies
but the amount recovered should be not more than the
actual value of the loss.
Accidentally Mr. Lopez house was razed by fire and incurred a partial
damage of 5,000,000, the following companies will pay :

Malayan 500,000
CCC 500,000
Stronghold 1,000,000
Plaridel 1,000,000
Centennial 2,000,000
TOTAL 5,000,000
PROXI MATE CAUSE
It is the cause which is most closely and
directly connected with the loss, not necessarily
in time but in efficiency or effectiveness.