Business Hints for Men and Women, Alfred Rochefort Calhoun [best classic books .TXT] 📗

Life insurance may be defined to be “A contract for the future payment of a certain sum of money to a person specified in the body of the policy, on conditions dependent on the length of some particular person’s life.”

There are two parties to this contract—the insured and the insurer.

The purpose of the insurer, if he take out the policy in his own name, is to provide in a measure for the care of his family, or other dependents, in the event of his death.

After a long experience with the death rates in all lands that keep mortuary statistics, the actuaries of insurance companies can now estimate with surprising accuracy the probable length of life before any man of any age.

The methods of insurance companies mean to be scientific, but be that as it may, they are certainly interesting.

HOW IT IS DONE

Let us take a young man of thirty, married, with one child, in good health, and in receipt of a fair salary, but with no property to leave his wife and little one in the event of his death.

To secure his dear ones, he decides to insure his life for, let us say, $3,000.

He fills out the blank, in which his age and all the other required information is given; then the insurance company’s doctor examines him and he is accepted as what is called “a good risk.”

Now, from its actuary tables, the company knows, with reasonable accuracy, the number of years this young man should live, barring accidents.

Already they have their tables of calculations for such cases. They know what expense will be required in the way of rent, clerks, advertising, etc., to care for this case till the prospective, the inevitable end is reached.

On these calculations the immediate and all subsequent premiums or payments are based.

The insurance company invests and reinvests the premiums, and the total of these, it is estimated, will meet the expenses and the amount of the policy at the time of its calculated expiration.

AS AN INVESTMENT

If the young man in question had the money, he would find it to his advantage to buy a paid up policy, that is one on which no further premiums would be required.

But, having the money for a paid up policy, could not the young man, without any expense for clerk hire or rent, invest it, and reinvest it with the interest, as long as he lived, and thus make by insuring himself?

There can be no question as to that, provided always that the young man lived out the calculated time, invested his insurance money at once, and kept on investing it in “safe things” as long as he lived. But how many young men are there who could or would take this course?

It is much easier to save from our earnings than it is to invest those earnings wisely.

FORMS OF LIFE INSURANCE

The straight life policy, payable to the heirs at death, is the form in general use, but there are others.

There is yet another form, known as the “endowment,” which in itself combines the usual life insurance with some of the privileges of a savings bank.

The endowment policy, while payable if death should occur before a fixed time, specifies the date when it shall be payable to the insured himself, if he should live till that time.

In this case the family is secured, in the event of death, and the insured has a guarantee for himself when he reaches life’s unproductive years.

The premiums on an endowment policy are necessarily greater than those on a regular life, and the premiums increase with the shortness of the time.

MUTUAL INSURANCE SOCIETIES

Seeing the vast sums accumulated by what are known as “the old line companies,” despite their high salaries and great expenses, working men throughout the world, but more particularly in the United States, have banded together and formed mutual insurance companies.

These companies, there are many of them, are known as societies, and their local branches are called “lodges,” “councils” or a similar name.

Properly conducted, these mutual societies should be able to furnish insurance at about actual cost, for the expenses of management and collections are small.

It can be said that some of them have been and are being well managed, but others, like their predecessors, the old line companies, have unfortunately been conducted for the enrichment of their promoters.

The mutual insurance companies, like their more pretentious prototypes, are now placed under the supervision of inspectors in nearly all the states.

AMOUNTS OF POLICIES

In the society companies, there is a limit to the amount, usually $3,000, for which one can be insured, but the regular companies have no such limitation.

In the mutual insurance companies, the insured cannot leave his insurance to his creditors, or to any one not within a certain degree of kinship.

In the regular companies a man may insure for any amount he thinks he can carry, and he can insure in the same way in any number of companies, and he can leave the money to any one he may select, or for any purpose he may choose.

Sometimes the policy is made payable to unnamed executors. These may be named in a will made after he has taken out his policy.

POLICIES AS SECURITY

Sometimes a man, without real estate or other personal assets, desires to raise a loan on his life insurance, which, it should be said, is a form of personal property. In this case he may assign his life policy, or his endowment policy, as security for the loan.

Again, if he is not insured and has no shadow of an asset, he may have his life insured for the benefit of another, in consideration for a loan.

LAPSES

When there is a failure to meet premiums, the policy is said to “lapse” or default.

Even in this case the insured has an equity.

Every policy, depending on the amount paid, has what is known as a “surrender value,” and by proper process this may be collected from the company.

In some states, if the insured fails to meet his premiums, the company is compelled to pay on the policy at his death a sum equivalent to that which he paid before default.

Some insurance policies have a clause stating that the contract will be void in the event of the suicide of the holder. The highest courts have set this clause aside. The ruling is that a suicide is an insane man, and that his heirs should not be made to suffer for his misfortune.

PROPRIETARY AND MUTUAL COMPANIES

The larger insurance companies may be either proprietary or mutual, some are a combination of both.

The proprietary companies are corporations organized by a number of men to conduct life insurance as a business enterprise.

Such a company must be regularly chartered, and is under the supervision of the state department of insurance.

Mutual companies, as the name implies, are organized and are meant to be managed for the benefit of the policy holders, who are also regarded as stock holders, with the right to vote in the election of officers and other company affairs.

Aiming to create a strong reserve fund to secure the policy holders, the mutual life insurance companies usually charge a little more in the way of premiums.

Many rich men have their lives insured for great amounts. This is done that their heirs may not be forced to break up the estate, at death, in order to settle the ordinary liabilities.

If it can be afforded, it is always well to carry some life insurance.