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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE
The “Cash and Carry” Rule provides that “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.” (Section 77, Insurance Code)
An insurance premium refers to the agreed price for assuming and carrying the risk insured against. It is the consideration paid to an insurer for undertaking to indemnify the insured against a specified peril.
Section 77 of Republic Act No. 10607 or the Insurance Code provides that “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.” This is known as the “Cash and Carry” Rule.
The law says:
“Section 77. An insurer is entitled to 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 provision applies, or whenever under the broker and agency agreements with duly licensed intermediaries, a ninety (90)-day credit extension is given. No credit extension to a duly licensed intermediary should exceed ninety (90) days from date of issuance of the policy.” (Section 77, Insurance Code)
Jurisprudence says:
“For it cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the imperative need for its prompt payment and full satisfaction.” (Spouses Antonio and Violeta Tibay, et. al. v. Court of Appeals, G.R. No. 119655, May 24, 1996)
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