DEAR PAO: ‘Cash-and-Carry’ Principle | Sept. 12, 2026

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2:27Accept 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 90-day credit extension is given. No credit extension to a duly licensed intermediary should exceed 90, 90, days from data of issuance of the policy. The foregoing provision embodies what is commonly referred to as the cash and carry rule in insurance, which is generally expressed by the maximum no premium, no policy. In Chartis Philippines Insurance Incorporated Versus Cyber City Tele Services, limited GR number 234,299, March 3, 2021, the Supreme Court, speaking through honorable associate Justice Ross-Marie D. Caron-Dong, clarified the legal consequences attendant to the payment or non-payment of insurance premiums. One, I F the insured paid the premium, the insurers liability attaches correspondingly. There is a valid and binding policy or contract of insurance and the insured may demand indemnification in case of loss.

3:27There is no credit on the premium to speak of and, therefore, none which the insurer can demand because he has already been paid. Two, I F the insured did not pay the premium and the parties did not agree that the insurers liability has attached, then there is no valid or binding contract of insurance. The insured cannot demand indemnification if loss occurs and neither can the insured demand payment of the premium. Three, I F the insured did not actually pay the premium but the parties have agreed that the insurers liability has attached, then the insured is considered to have extended credit on the premium. When the insured accepts the terms of the credit, there is a valid and binding contract of insurance. The insured must pay the premium before the end of the credit term, otherwise, he cannot demand indemnification in case of loss. The insurer may demand the premium, whether or not loss occurred. Accordingly, the general rule is that an insurance policy does not become valid and binding unless the required premium has been paid, except when a valid credit extension exists. The cash and carry rule is founded upon the principle that the insurer assumes the risk and consideration

4:29of the insured's payment of the premium. In your case, the failure of the automatic debit due to insufficient funds constitutes nonpayment of the premium. However, this does not necessarily mean that the policy is immediately terminated or rendered ineffective, as the terms of the policy in any applicable grace period or credit arrangement must first be considered. If the premium remains unpaid and no exception applies, the insurer may deny a claim for any loss occurring during the period without valid coverage. We hope that we were able to answer your queries. This advice is solely based on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated. Thank you for your continued trust and support. Editors note, dear POW is a daily column of the public attorney's office. Questions for chief Acosta may be sent to Der Pal at Manila Times.net. This podcast is brought to you by Thompson Reuters. The best don't just do their work, they change what's possible. Cases one, audits completed, jobs saved.

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