Terms and Conditions for Refund and Cancellation of Policies in The Non-Life Insurance Setting in The Philippines [Infographic]
Unexpected events, such as accidents and loss of properties, happen every day. And these uncertainties can set back people financially. This is why an insurance policy is vital for Filipinos who want to protect themselves and their valued properties from damages and losses. Getting insured can help minimize the financial burden the unexpected events may bring.
There are different kinds of non-life insurance Philippines available in the market, each with varying features, benefits, and obligations. Filipinos can avail car insurance, home insurance, travel insurance, and health insurance. For those who are running a business, there are available business insurance policies. Also available are aviation insurance, marine insurance, and engineering insurance. Insurance companies in the Philippines are exerting their best efforts in providing the appropriate and best insurance coverage for their clients.
However, even with the best insurance coverage, many policies are getting canceled. The reasons behind the cancellation or voiding of insurance plans may vary. The most common cause of forfeiture of all rights under the policy is the non-payment of premiums. According to the Insurance Commission (IC), the two essential policy conditions which, if violated, will void the entire policy, are:
- Willful concealment or misrepresentation by the insured of any material fact or circumstance concerning the subject thereof or the interest of the insured therein; and
- Any fraud or false swearing by the insured relating thereto.
Insurance companies are businesses that also deal with risks. To survive as a business, insurers have to assess risks to avoid losses. Hence, if you do not meet the policy conditions they have set and find the situation too risky, they could cancel your contract.
Although insurance companies in the Philippines have varying terms and conditions with their offered policies, these are set within the IC’s guidelines. The IC is the government agency supervising and regulating life and non-life companies’ operations, mutual benefit associations, and trusts for charitable uses. It ensures that the operations of insurance businesses are within the public interest.
Holders of insurance policies need to know their policy coverage and their insurance provider’s terms and conditions. Accordingly, they should know the laws governing the insurance industry and insurance policies offered to Filipinos. It includes Republic Act No. 10607, which is an act strengthening the insurance industry, further amending the Presidential Decree No. 612, which is known as The Insurance Code.
Accordingly, the Insurance Commission has based its guidelines on the approval of non-life insurance policy forms for all licensed non-life insurance companies in the Philippines in the Insurance Code. It includes the terms and conditions for the right of return of premium, cancellation of the policy, and the right to rescission the insurance policy.
Right of Return of Premium
Section 7.4 of the IC’s guidelines details the person insured’s right of return of premium and the conditions when they are entitled to a return of premium.
- To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against; (Section 80, Insurance Code).
- Where the insurance is made for a definite period and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro-rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued: Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law. (Section 80, Insurance Code).
- A person insured is entitled to a return of the premium when the contract is voidable, and subsequently void under the provisions of the Civil Code; or on account of the fraud or misrepresentation of the insurer, or of his agent, or on account of facts, or the existence of which the insured was ignorant of without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy. (Section 82, Insurance Code).
- ln case of an over insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. (Section 83, Insurance Code).
However, there are also conditions where the person insured is not entitled to a return of premium:
- If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned. (Section 81, Insurance Code).
- A person insured is not entitled to a return of premium if the policy is canceled, withdrawn or if a claim is denied by reason of fraud. (Section 82, Insurance Code).
Cancellation of Policy
Section 7.5 of the IC’s guidelines detail the conditions which allow insurers to cancel a premium.
A. The insurer can cancel no policy of insurance except upon prior notice to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:
- Non-payment of premium;
- Conviction of a crime arising out of acts increasing the hazard insured against;
- discovery of fraud or material misrepresentation;
- discovery of willful or reckless act or omission increasing the hazard insured against;
- physical changes in the property insured which result in the property becoming uninsurable; or
- determination by the Commissioner that the continuation of the policy would place the insurer in violation of this Code. (Section 64, Insurance Code).
B. The basic insurance policy form shall contain a provision on cancellation of the policy enumerating the grounds provided under section 7.5 of these Guidelines or a reference to Section 64 of the Insurance Code. Microinsurance and surety bond form may or may not contain such provision on cancellation under Section 64 of the Insurance Code. In the case of a surety bond form, such cancellation must comply with the obligee, court, or Insurance Commissioner’s required consent.
C. All notices of cancellation shall be in writing, mailed, or delivered to the insured at the address shown in the policy or to their broker, provided the broker is authorized in writing by the policy owner to receive the notice of cancellation on his behalf and shall state:
- Which of the grounds set forth in Section 64 of the Insurance Code is relied upon; and
- That, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. (Section 65, Insurance Code)
D. Any automatic termination provision of insurance policy, except nonrenewal and expiration of the period, even if the same is based on the grounds set forth in Section 64 of the Insurance Code, should be avoided. In case of cancellation, the insurance company is required to send notice of cancellation to the insured.
Right of Rescission
Section 7.6 of the IC’s guidelines detail the insured and insurer’s right to revoke, cancel, or repeal an insurance policy and the conditions when they are entitled to rescind a premium.
A. Termination may include rescission or cancellation of the policy. In case of termination other than the grounds under Section 64 of the Insurance Code, the violation of the policy’s provision or any breach must be consistent with grounds allowed by the law on concealment, representation, and warranty.
B. The insurer has the right to rescind the policy under the following grounds:
- When representation is false on a material point whether affirmative or promissory. (Section 45, Insurance Code).
- Violation of material warranty on the part of either party or other material provisions of the policy. (Section 74, Insurance Code)
- Intentional or unintentional concealment. (Section 27, Insurance Code)
- A policy that declares a violation of a specified provision shall avoid a policy. (Section 75. Insurance Code).
- Intentional or fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty. (Section 29, Insurance Code).
C. The insurer is entitled to rescind a contract of fire insurance in case of an alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks. (Section 171, Insurance Code)
The insurance companies and their clients both have their responsibilities when handing over and holding insurance premiums. The insurers have to uphold their integrity by providing the insured the right protection they need and ensuring they get the best coverage from their premium. In contrast, the insured should also ensure that they do their bit by paying their premium accordingly and following the policy’s set terms and conditions.
While it is vital to consider your needs, the policy coverage, and the insurance provider when availing of an insurance premium, people should also consider the insurance costs and if they can afford to pay it in the long run. Non-payment of premiums can lead to its cancellation and forfeiture of all rights under the policy.
Before availing of an insurance policy, Filipinos should have a comprehensive comparison of insurance premiums. Looking through a comparison website insurance Philippines can help you select the best non-life insurance option for your needs. Visit our website at iChoose.ph to see the ideal coverage plan for you and your valued properties.
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