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This article is provided for general informational purposes only and does not create, nor shall it be construed as creating, a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. For advice on specific legal concerns, you are encouraged to engage the services of a qualified lawyer. You may also directly consult Alburo Alburo and Associates Law Offices for proper guidance tailored to your situation.

The views and information presented herein are based on the laws, rules, and jurisprudence prevailing at the time of writing. They do not take into account subsequent legal developments and should not be relied upon as a substitute for professional legal advice.

AT A GLANCE:

Insurable interest refers to the legal or pecuniary interest of a person in the subject of the insurance such that he will derive benefit from its preservation or suffer loss from its destruction.

What is insurable interest?

Under the Insurance Code of the Philippines, insurable interest is an essential element of an insurance contract.

Insurable Interest in Life Insurance

Section 10 of the Insurance Code provides that every person has an insurable interest in the life and health:

1. Of himself, of his spouse and of his children;
2. Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
3. Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and
4. Of any person upon whose life any estate or interest vested in him depends.

The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured. In such a case, the share forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries, the proceeds shall be paid in accordance with the policy contract. If the policy contract is silent, the proceeds shall be paid to the estate of the insured. (Section 12, Insurance Code)

Insurable Interest in Property Insurance

Section 13 of the Insurance Code states that every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

An insurable interest in property may consist in:

1. An existing interest;
2. An inchoate interest founded on an existing interest; or
3. An expectancy, coupled with an existing interest in that out of which the expectancy arise. (Section 14, Insurance Code)

Section 17 of the Insurance Code provides that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof.

When Must Insurable Interest Exist?

An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs. (Section 19, Insurance Code)

Effect of Lack of Insurable Interest

Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void. (Section 25, Insurance Code)

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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