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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

An ordinary 7-month marine cargo policy is issued on January 1 for PHP 490,000 premium, paid in full. Policy period: January 1 to July 31. On March 1, the insured cancels the policy due to a misstatement in risk. The insurer refuses any refund, contending that the premium was earned at inception. Under Presidential Decree No. 612, as amended by RA No. 10607, which statement correctly describes the rule on when premium is earned and the correct unearned premium refund as of March 1?

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Premium is earned pro rata over the policy period; upon insured cancellation, the unearned premium is the portion of the premium corresponding to the unexpired portion of the policy. As of March 1, two months have elapsed and five months remain, so the unearned premium to be refunded is PHP 350,000. Premium is earned at inception; there is no refund on cancellation; the insured forfeits the entire PHP 490,000 premium. Premium is earned on a short-rate basis under a fixed schedule; as of March 1, the unearned premium would be PHP 420,000. The contract is void ab initio due to the material misstatement; no premium refund is due to the insured.

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