LIFE INSURANCE.
LADIES do not take advantage of the system of
life insurance to the extent one would expect,
seeing the benefits it is capable of conferring
upon themselves and their belongings; and as
their indifference is no doubt, in many cases,
owing to a want of knowledge of the subject, a
chapter thereon may be useful.
Life insurance is an admirable system, devised,
in all its ramifications, to provide against loss or
damage through the various contingencies to
which human nature is subject.
A simple life insurance is that by which a
person may leave behind him a sum of money
for the benefit of those who, during his life, have
been dependent upon him. For example, a
husband, whose income is entirely derived from
his own exertions, desires to make some pro-
vision for his wife and children in the event of
his dying before them. At the age of thirty he
may, by paying £25 a year to an Insurance
Office, secure at his death, whenever it may
happen, £1,000, for the benefit of his wife or chil-
dren, or as he may direct by his will. In a way
insurance is a kind of savings bank, but impos-
ing an obligation on the part of the depositor to
save a certain sum every year. In the case of
the bank, the savings are optional, and cease at
death; whereas by insurance, the return of a
large sum is the result of the death of the com-
pulsory depositor. If a person put by £25 every
year and invested that sum in the Government
Funds at 2 1/2 per cent., or deposited the same sum
annually in a bank, at the same rate of interest,
it would take him twenty-eight years to accumu-
late £1,000, if he lived so long; whereas by an
insurance on his life for the same amount, if he
died a week after the first payment of £25 had
been made, the £1,000 insured would be paid to
his representatives. It might be said that if the
person lived longer than the term of twenty-
eight years and went on saving the £25 every
year, he would in the end accumulate more than
£1,000. This, however, is met by insuring in
such manner that the insurance carries "profits,"
that is, additions made by the gains of the office
from time to time. If insurance be made in this
manner, for which a slightly higher rate of pre-
mium is paid, it will be found that, however long
a person might live, more would accrue at death
by insurance than by saving.
There are in active existence so many insur-
ance companies of good repute and undoubted
stability that no difficulty need be experienced
in making a judicious selection. Of course, the
intelligent insurer would prefer an office whose
system would best suit his own requirements.
There are two kinds of Insurance Companies,
one known as a "Mutual" office, in which _all_ the
profits which may be earned are periodically
added to the amount insured, the other in the
form of a Joint-Stock Company, in which a small
proportion of the profits are distributed amongst
the Shareholders and the remainder added to
the Insurances. The Mutual Office dividing the
whole of its profits amongst the insured would
appear to be the more advantageous of the two,
and undoubtedly it is, all other things being
equal; but insurances may be effected which do
not share in the profits, at lower rate of pre-
mium, and in that case one system is as good as
the other. The intending insurer would do well
to obtain the prospectuses of several offices,
which he can easily do by writing for them
direct to the head office or by applying to the
several agents of the companies who abound in
all towns; and carefully compare one with
another. It will be found, perhaps, that one
office charges a less annual premium for an in-
surance than another, but this may be compen-
sated for by the latter declaring larger profits, or
giving advantages in other ways. For instance,
a certain "Mutual" office charges for an insur-
ance of £1,000, on the death of a person begin-
ning to insure at the age of thirty, a pre-
mium of £26 16s. 8d. per annum, whereas a
certain Joint-Stock Company's demand is only
£24 14s. 3d.; but the advantages offered by the
former in the shape of larger bonuses, though
deferred, are greater, while the benefit of a less
annual payment is of course immediate. Where
the insurance is effected at the same age and
for the same amount, but with no other benefit
or profit prospectively than the bare amount,
the premium in the former case is £21 4s. 2d.,
and in the latter £21 15s. 10d. There are good
offices, however, where the premium charged is
less than this.
There is at least one office which insures upon
what is called the half-credit system. One-half
the usual premium is paid for a certain term of
years, and thereafter the full premium is
charged. This may be useful in a case where
a person wishes to insure while young and the
premiums are low, and at the same time is desir-
ous of deferring the full payment until his income
is so improved that he can better afford it.
This system is carried still further by an in-
surer only paying half the premium during his
lifetime, the other half being accumulated until
his death, and then, with interest added, de-
ducted from the amount payable in respect of
the insurance policy.
Having chosen the insurance office or com-
pany which best suits his purpose, the proposer
applies to its nearest agent and makes known
his desire to insure his life. A form containing
printed queries somewhat like the following
(though offices differ somewhat in details) will
be placed before him and the blank spaces filled
in either by the agent or himself.
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| PROPOSAL FOR LIFE ASSURANCE |
|-------------------------------------------------------------------------------------------------------------------------------|
| | Full Name _____________________________________________________ |
| | Profession or Occupation ______________________________________ |
| 1. Life proposed to be Assured | Business Address ______________________________________________ |
| | Residence _____________________________________________________ |
| | Married or Single _____________________________________________ |
| ------------------------------------------------------------------------------------------------------------------|
| 2. Age next Birthday ________ years. Born at _________________________________________________________ |
| on the ___________________________ day of _______________ in the year 18_________ |
| (Evidence to be produced.) |
| ------------------------------------------------------------------------------------------------------------------|
| 3. Has he resided out of Europe? | |
| If so, where, and for what period? | |
| ------------------------------------------------------------------------------------------------------------------|
| 4. Is he, and has he always been, of sober and | |
| temperate habits? | |
| ------------------------------------------------------------------------------------------------------------------|
| 5. Has he had any serious illness or disease | |
| tending to shorten life? | |
| ------------------------------------------------------------------------------------------------------------------|
| 6. Has any near relative died of any hereditary| |
| disease? | |
| ------------------------------------------------------------------------------------------------------------------|
| 7. (1) Has a proposal to effect an Assurance on| |
| his life ever been declined? |_________________________________________________________________|
| (2) Or accepted at more than the ordinary | |
| rate? |_________________________________________________________________|
| (3) If so, on how many occasions, and | |
| when, and by what office or offices? | |
| ------------------------------------------------------------------------------------------------------------------|
| 8. Is there any other circumstance which ought | |
| to be communicated in order to enable the | |
| Company to judge fairly of the risk? | |
| ------------------------------------------------------------------------------------------------------------------|
|If the | Name __________________________________________________________ |
|person has 9. (1) Who is his usual Medical Attendant? | Residence _____________________________________________________ |
|never | Has known him ________________ years. |
|required (2) When was he last in professional atten- | Date of Attendance ____________________________________________ |
|Medical | Ailment _______________________________________________________ |
|attendance, ------------------------------------------------------------------------------------------------------------------|
|the fact | 1st Friend. | 2nd Friend. |
|should be | | (if necessary: see marginal note to |
|stated, and 10. Mention an intimate friend, who is not in- | | Question.) |
|reference terested in this Assurance, to be referred | Name ____________________ | ___________________________________ |
|given to to for information as to health and habits | Residence _______________ | ___________________________________ |
|TWO friends, of life | Profession or | |
|in answer to | Occupation ____________ | ___________________________________ |
|Question 10. | Has known him _____ years | Has known him _____ years. |
| ------------------------------------------------------------------------------------------------------------------|
|If the | Name __________________________________________________________ |
|Proposal be 11. Name, &c., of the person in whose favour | Profession or Occupation ______________________________________ |
|upon the the Assurance is to be effected? | Business Address ______________________________________________ |
|person's own | Residence _____________________________________________________ |
|life these ------------------------------------------------------------------------------------------------------------------|
|enquiries 12. Is the pecuniary interest in the Life to be | |
|need not be Assured, which is the object of this | |
|answered. Assurance, to the full amount thereof? | |
|-------------------------------------------------------------------------------------------------------------------------------|
| Sum to be Assured £_____________________________ With or without Profits? _____________________________________ |
| Is the Policy to be for Life? __________________ Are the premiums to be payable Yearly? _______________________ |
| I do hereby declare that the above statements are true, and that this Proposal and Declaration shall be the basis of |
| the contract for effecting the above-mentioned Assurance, which Assurance is also conditional on the accuracy, in all |
| respects, of the statement for the Medial Officer, made, or to be made, by the person whose life is proposed for Assurance. |
| Date __________________________________ Signature of the Person in |
| whose favour the Assur- _________________________________________________ |
| Witness _______________________________ ance is to be effected. |
| Address and Occupation ______________________________________ |
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The proposer has now to undergo one other
formality, disagreeable no doubt, but absolutely
necessary, and that is the medical examination.
This is done by the medical officer of the com-
pany who has to certify that the proposer is free
from any defect likely to shorten his natural life,
and that he is sound "in wind and limb." Defi-
ciency in the number of the latter is, however,
not considered unsoundness, as a person with
one arm, or one leg, or one eye may be just as
good a "life" and therefore equally eligible for
insurance with him who is perfect. All the en-
quiries in the form are made by the Office and
the expenses (including the doctor's fee) paid by
the Company.
If the proposal is accepted, the proposer is
informed of the fact and then pays his first pre-
mium in advance, it may be a year's, or half-a-
year's, or a quarter year's, at his own option,
and he then becomes (subject to the rules of the
particular company) the insured.
A few days subsequently a life policy will be
sent to the insured. This is a document setting
forth, in full, the terms of the agreement between
the Company and the insured, and must be care-
fully kept, in such wise that it may readily be
discovered by the person for whose benefit it is
ultimately intended. The writer once found
amongst some old papers a life policy in the
name of a man who had been dead for many
years. On enquiry at the office it was found
that the amount which was payable at his death
had, by some neglect, never been claimed.
The company of course at once paid the money,
and a needy sister was very much benefited.
Thirty days' grace are usually allowed for
subsequent payments of premium. It is custo-
mary for insurance offices to forward to each
policy holder a reminder, from one to four weeks
before the periodical payments for premium
become due, but the absence of any such notice
will not be accepted as an excuse for non-pay-
ment, and if the premium be not paid before the
thirty days' grace allowed have expired, the
policy becomes void. It may, however, be re-
vived upon paying a fine and producing a
medical certificate of health.
Should the proposal be declined the fact will
be notified to the proposer, but he will not be
informed of the reason. Proposals are rejected
because of something wrong being discovered by
the medical examiner, or because of intemperate
habits, or that the history of his near relations
in regard to health and longevity is unfavour-
able; anything in short that indicated that the
proposer will not, in all probability, live as long
as a healthy man is expected to live is enough
reason for declining to insure his life.
Insurances may be effected for a limited period,
say for one, three, or five years, at about one half
the premium charged for the whole term of life.
If the insured dies within the period, the amount
of the policy is paid, but the insurance ends with
the periods of time agreed upon. This class of
insurance is useful in many ways. For example:
A person with a certain income for life is desir-
ous of borrowing £500, to be repaid by annual
instalments. There would be no difficulty in
finding a lender, provided he could be sure of
repayment; and this could be secured in this
manner -- the borrower would assign to the lender
£100 a year of income for five years for the gra-
dual discharge of the loan; the borrower's life
would also be insured for five years and the
Policy assigned to the lender. If the borrower
lived for five years the loan would be paid out of
the income. In the event of his death, it would
be paid by means of the insurance money.
Another example: a child aged seventeen is
entitled to a fortune, large or small, at the age
of twenty-one, but meanwhile is wholly depen-
dent on its mother who has only an annuity for
her life. Should the mother die before the child
becomes of age the latter would be left without
the means of subsistence. In such a case the
prudent mother would insure her own life for the
four years which must elapse before the child
could come into the fortune, for such a sum as
would keep it from want, so that in case the
mother died the insurance money would provide
the means of living. The premium charged on
this class of insurance is moderate; about £2 6s.
for a person aged fifty; and the outlay by the
mother could be subsequently repaid when the
child was in a position to do so.
There are other special modes of insurance to
prevent loss or damage in cases of remote risk;
indeed almost any chance of loss through the
possibility of something improbable occurring
may be guarded against by insurance. For
instance, a lady aged forty-five has been married
for twenty years and has had no children. If she
has a son her property will descend to him; if
she dies childless it passes to a nephew. The
chance of the lady having a son is extremely
remote but still there is a possibility, and it is
against loss by this possibility happening that
the nephew takes out a policy of insurance for
any reasonable amount, the premium charged
being surprisingly small and payable in one sum
down.
BONUSES.
It has been mentioned in a previous page that
insurance has the advantage over the savings
bank, no matter how long a person may live,
and this is brought about by the operation of
Bonuses, so called. These are the whole pro-
fits in the case of a Mutual Company, and the
larger proportion of the profits in the case of
a Joint-Stock Company, which are distributed
amongst the policy holders. At the end of every
five years, in some cases seven, a valuation is
made of all the property of the Company and on
the other hand is ascertained what the company
is liable for, present and prospective. The
difference between the two constitutes the sur-
plus or profits, assuming of course that the assets
preponderate. This seems at first sight to be
a very simple process, but in reality the most
intricate calculations are necessary to arrive at
mathematical accuracy; but this needs no further
notice here. The bonus being declared, it may
be dealt with in various ways.
1. -- It may be added to the amount insured,
and so payable at death.
2. -- It may be commuted for an immediate
payment in cash. (In this case the amount
will, of course, be less than in No. 1.)
3. -- It may be applied in a permanent reduc-
tion of the future annual premiums, or a
proportionately larger reduction of these for
the next five or seven years, and in other
ways. Most offices granting every reason-
able facility for applying profits in any way
the insured may consider desirable.
_Endowment Insurance_. -- This is a class of
insurance by which an insurer may receive the
amount of a policy himself during his life, at
an age to be fixed at the time the insurance is
effected. Should he die before reaching the age
specified, the money is payable to his represen-
tatives.
It may also be so arranged that instead of
receiving the money at a certain age, he may be
paid a fixed sum annually for the rest of his life
thereafter.
For example -- a person at the age of thirty
may insure £1,000 to be paid to him on attain-
ing the age of sixty. The annual premiums for
insurances of this kind vary with different offices;
but they can be effected at the age named, at
about £28 10s. for the £1,000. If the person
died before attaining the specified age, the money
would be paid to his representatives; if he sur-
vived, he could either receive the £1,000, or be
granted an annuity for the remainder of his life
of £92 a year. In the case of females the
annuity would be £83 only, as they are supposed
to live longer than males.
_Non-forfeitable Policies_. -- This plan provides
for the continuance of insurance upon the life of
a policy holder should the insured from any cause
be unable to keep up his premiums. The prin-
ciple of this scheme ensures that, in considera-
tion of the premiums already paid, a policy for
a certain amount -- less of course than that named
in the original policy, which would be cancelled
-- would be granted freed from all future pay-
ments in respect of premiums, and the insurance
money of the new policy would be payable at
death. For example -- a person insures his life
for £1,000 at the age of thirty, the annual pre-
mium on which would be £25 a year. At the
age of forty he finds himself unable any longer
to pay the annual premium, but to avoid the
loss of the £250 which he has paid during the
ten years, he will surrender the old policy for
£1,000 and will be granted a new one, say for
half the amount, payable at death, and he will
not be called upon to pay any further premiums.
_Settlement Policies_. -- This class of policy is
issued under the Married Women's Property
Act (1882), whereby a trust can be created for
the benefit of a wife or children of an insured
person, the trustee being the Insurance Com-
pany. The advantage of this is that such a
policy does not constitute a part of the husband's
estate or become subject to his debts, either
whilst living or at his death, so that in the
latter event the money is paid to the widow or
children direct for their own use. A policy of
this kind, if necessity should arise, could also be
exchanged for a non-forfeitable policy in the
manner before pointed out.
_Endowments for Children_. -- A parent, by paying
a premium of about £5 5s. annually, can secure
to a child aged six a sum of £100, on its attain-
ing the age of twenty-one. Should the child die
before reaching that age, the money paid in pre-
miums is not lost, for it is all returned to the
parent without deduction.
By this means a marriage portion or outfit for
a girl, or a start in business for a boy can be
provided to any amount that may be desired.
_Insurance on Joint Lives_ is another mode of
insurance, very useful in particular cases. For
example: a mother aged fifty has an income,
for her life and no longer, of £300 a year, and
she has a daughter aged twenty, who has no
means of her own, present or prospective, being
entirely dependent on her mother. The joint
lives are insured for, say, £2,000, which would
cost in premium £100 a year; the insurance
money to be paid at the death of the first of the
two. If the daughter died first the mother would
get back, by the insurance money, possibly
more than she had paid in premiums. If the
mother died first, say at the age of seventy, by
that time the daughter would have attained the
age of forty, and the £2,000 would be paid to
her. With the money she might, if she so
pleased, buy an annuity for life of £110 a year.
_Insurance on the Longest of Two Lives_, payable
on the death of the survivor, is useful in cases
where land or house property is held on lease,
so that there may be no pecuniary loss when the
lease expires. The rate of premium is in this
case naturally less than where the insurance is
to be paid on the earlier of the two deaths.
SURRENDERS.
If from any cause it is desired to give up a
policy and discontinue paying any more pre-
miums, the offices will pay to the insured what
is called the surrender value of the policy, at the
same time cancelling it and all its conditions.
This surrender value may be roughly calculated
at about 40 per cent. of the premiums paid, in a
case were bonuses have been added to a policy,
and about 33 per cent. of the premiums paid in
a case where the bonuses have not been so
applied. For example: a person has paid £25
a year in premiums for ten years -- in all £250 --
on a policy for £1,000, to which has been added
£60 in the shape of bonuses. The surrender
value in such a case would be £100. But if the
insured had taken his bonuses in cash, or his
policy did not carry profits, then the surrender
value would be £82 10s. only.
Any insurance office will lend the insured, on
the security of the policy, an amount of money
not exceeding the surrender value, and the rate
of interest is usually moderate.
In this case there would be no necessity to
abandon the policy, which would be kept alive
and increased by added bonuses as before.
FIRE INSURANCE.
This is a distinct branch of insurance business,
the object being to compensate a person in case
of pecuniary loss through the accidental burning
of his property. By paying annually a com-
paratively small amount in the shape of pre-
mium, a person may insure that in case of the
destruction by fire of such of his goods as may
be specified in a fire policy, issued by the Insur-
ance Company, he will be recouped their value.
Nearly all the Fire Insurance offices are agreed
in charging a certain rate of premium, which is
called the tariff rate. For dwelling-houses built
of brick or stone with slate or tile roof, the rate
is only 1s. 6d. for every £100. For more hazard-
ous buildings such as thatched houses, ware-
houses, inns, shops, &c., the rates are higher,
according to the nature of the risk. Household
furniture and the other contents of a brick or
stone house can be insured at various rates, or
they may be included in one insurance with the
house, when the rate would be 2s. per cent. for
the whole.
It should be remembered that there is a limit,
usually of 5 per cent., of the whole sum so in-
sured, placed on any one work of art which may
be destroyed.
For instance, a picture valued at £200 maybe
burnt in a house which, with the contents, is
insured for £2,000 If the picture were alone
destroyed, the office would only compensate to
the extent of £100, being 5 per cent. on the
£2,000, the total amount of the insurance. Any
particular picture or work of art may, however,
be specially insured by itself.
Insurances should never be made for a greater
sum than the value of the property insured, as it
would be paying more premium for no purpose.
The offices take good care that they pay no more
than the actual value of the property destroyed,
which they have the means of ascertaining with
some degree of accuracy.
It has been found necessary to subject the
insurance of farming stock to special conditions.
A farmer having stock of the value, say, of
£1,000, might reason in this way: "My ricks,
implements, crops, &c., are situated widely
apart, and it is difficult to imagine that all could
be consumed in one and the same fire; therefore,
I will insure the whole stock for £500 only, then
I shall have to pay only half the amount in the
premium I should be liable for in case I insured
to the full value." The offices are, however, quite
alive to this kind of reasoning, and frustrate
the intention by inserting what is called the
"average" clause in the policy, the effect of
which is that in the event of a claim being made
for loss by fire, only one half of the value would
be made because only one half of the value of the
stock was insured. Live stock, however, may be
separately insured without the average clause,
and animals killed by lightning are paid for if
insured against loss by fire.
There are other offices which insure against
loss by special contingencies, such as damage to
glass houses, and cattle, and garden produce, by
hailstorms; destruction of boilers by explosion,
of plate glass, and from accident or disease
affecting cattle. There are companies, too, which
insure against accidents sustained by rail, road,
or water, guaranteeing a specified sum in case of
death, and compensation in case of injury. Also
societies which take the place of sureties and
guarantee an insurer against loss or default by
anyone in his employ; and companies which
undertake to make good any loss arising from
burglary or larceny. In all cases, of course,
the liability of the office is limited to a certain
declared amount.