Death and life insurance
Life insurance is clearly beneficial to the insured and to the beneficiaries he/she will leave behind. This comes with the saying you reap what you sow.
Published in Daily Tribune on November 27, 2020
by: Miko Jim Paulo V. Panganiban
Death is not extinguishing the light; it is putting out the lamp as dawn has come. So said Rabindranath Tagore. While this poetic line may bring some comfort to him who faces death. Death’s inevitability is rarely a balm for those who lose a parent, child, spouse, or friend. For them, life must go on despite their loss.
Fortunately for them, there is an industry that alleviates the economic loss wrought by death to those who survive the departed. This is the life insurance industry which has gained momentum in recent years in the country borne of the recognition of the economic relief it provides to the family of the departed.
In its most basic form, life insurance is a contract by which an insurance provider, in exchange for insurance premiums paid, undertakes to pay a sum of money to the beneficiaries of an insurance policy upon the death of the person whose life is insured. These undertakings, the amount insured and premium, and other terms and conditions, are contained in the insurance policy which serves as the contract between the insurer and the insured.
Nowadays, insurance contracts have evolved into two principal types, the traditional life insurance, and the variable life insurance contract. Traditional life insurance requires the payment of premiums until death of the life insured after which the insurance provider releases payment of a fixed amount of money to beneficiaries. The other is the variable contract. This type of contract partakes the nature of an investment plan. What the insurance provider does under this type of insurance is to take a portion of the premiums paid and reserve this for the insurance of the life insured. The remaining portion of the premiums paid is invested by the insurance provider — usually in mutual funds — for the benefit of the owner of the insurance policy. It is called a variable contract because the yield varies.
While the notion of insurance normally evokes the act of a person taking an insurance policy on his own life in favor of his beneficiaries, the Insurance Code of the Philippines actually allows you to secure insurance policy on the lives of your spouse or children, or any person in whom you depend on for support or education, or who owes you money. This is because the law considers you to have insurable interest in their lives.
Usually offered by insurance agents or financial advisors, most insurance policies offered are now non-medical, meaning, they do not require any medical examination as part of the application process. However, you may need to disclose any medical condition or procedure you may have undergone for the insurance company to determine the amount of coverage and premium. Failure to do so could constitute fraud, concealment, or misrepresentation that could void the policy and entitle the insurer to deny your claim or rescind the policy, and return your premium.
Under Section 48 of the Insurance Code or the incontestability clause, the insurer is given a period of two years from the date of issue of the policy to thoroughly investigate the insured. Hence, if the insurer finds any fraud, concealment, or misrepresentation by the insured in his/her application for life insurance policy, the insurer may rescind the contract. On the other hand, if any fraud, concealment, or misrepresentation is found after two years of the effectivity of the policy, the insurer is barred from questioning the validity of the policy.
Commonly, the death in life insurance policy refers to natural or accidental death, but how about intentional death or suicide? Unless expressly excluded or where the insurance policy provides for a shorter period, Section 183 of the Insurance Code makes suicide compensable when committed after the policy has been in force for a period of two years from the date of issue or reinstatement. This is called the suicide-exemption period. Suicide, if committed while in a state of insanity, is compensable regardless of when it is committed.
Life insurance is clearly beneficial to the insured and to the beneficiaries he/she will leave behind. This comes with the saying “you reap what you sow.” It is, however, important to have a full understanding of the terms and conditions of your life insurance policy which almost always contain technical terms. Perhaps it is best for you to resort to legal advice to better apprise yourself of what the insurance policy says in light of laws governing insurance in the country.
