RANDY B. ESCOLANGO

PREMIUM payments are essential for an insurance system to work. To effectively work as a risk-distributing mechanism, these payments are pooled together by the insurance company to fund the losses of clients who unfortunately experienced the perils stated in their policy. But when clients consistently fail to pay the premium, the insurance business may run out of funds once legal claims add up. This is the reason why the law mandates that an insurance policy is valid only if premium has been promptly paid, subject to some exemptions such as when the policy allows for a grace period, credit extensions, and installment as mode of payment.

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