Premium – consideration paid to an insurance company for the insurance company’s undertaking to indemnify the insured against the risk insured against (see Insurance Code of the Philippines Annotated , p. 232).
An insurer is entitled to the payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provisions applies. (Insurance Code, sec. 77)
As a rule, the insurance policy is not binding until payment of the premium. Exceptions to this rule are the following: (a) in case of life or an industrial life policy whenever the grace period applies; (b) when there is an acknowledgement in a policy of receipt of premium even if there is a stipulation that it shall not be binding until the premium is actually paid; (c) when there is an agreement allowing the insured to pay the premium in installments and partial payment has been made at the time of the loss; (d) when there is an agreement to grant the insured credit extension for the payment of the premium and the loss occurs before expiration of the period; and (e) when estoppel bars the insurer from invoking Section 77 (see Insurance Code of the Philippines Annotated , p. 245).
The insurance company issued a fire insurance policy in favor of the insured on a residential building. The policy provides for payment of the premium in full before the policy shall be deemed effective, valid and binding upon the insurance company. The insured paid PhP600 put of the total premium of PhP2,900. The insured paid the balance of the premium 2 days after the insured property was completely destroyed by fire. Is the insurance policy valid and enforceable upon mere partial payment of the premium? (see Insurance Code of the Philippines Annotated , p. 235).