explained as far as The continuous-in example, being only $15.44, when the ages of the insured and beneficiary are respectively 25 and 45, as compared with the $19.00 rate on an ordinary life policy. The reason for this difference in the rates has already been the installments certain are concerned. stallment feature is an addition to the ordinary installment part of the contract and must, of course, be charged for in order to enable the company to meet its liability for those installments which it may have to pay to the beneficiary in case she should outlive the insured by more than twenty years. But this extra cost is slight because it is apparent that where the ages of the insured and beneficiary are about the same, and especially where the beneficiary is much older than the insured, there will not be on the average many instances where the beneficiary will outlive the insured by more than twenty years; furthermore, as regards the limited number of cases where the continuous feature goes into operation, the number of installments payable will not average high. Guaranteed Interest Bonds. Another method of providing a permanent and certain income to the beneficiary or the insured consists in the issue of "income" or "guaranteed interest bonds" upon the death of the insured or the completion of the endowment period. If the rate of interest assumed for the mathematical computation of rates is 3 per cent., the company can, if it is willing to guarantee this rate, allow the proceeds of the policy to be left with it during the lifetime of one or more beneficiaries, and in the meantime pay annually the agreed rate of interest. The plan simply amounts to allowing the proceeds of the policy to stand out at interest, the principal to be paid by the company upon the death of the beneficiary or beneficiaries. Sometimes the policies provide that the annual return will be increased by the annual dividends apportioned by the company, and that, in the absence of restrictions by the insured, the beneficiary, at any time an interest payment is due, may withdraw the amount so left with the company. Another variation of the plan consists in making the rate of interest on the bond considerably higher than the company assumes it can earn. To pay the higher rate, however, the company charges a premium for an additional amount of insurance sufficiently large to furnish thé extra return. CHAPTER X OTHER LEADING TYPES OF CONTRACTS JOINT-LIFE POLICIES Under an ordinary joint-life policy two or more persons are insured in favor of each other, the policy terminating and being payable when the first death amongst them occurs. Such a policy may be issued in connection with any of the forms of insurance previously discussed, viz, term insurance, whole-life insurance, endowment insurance, etc., and the premium may be paid on either the continuous-payment or limited-payment plan. If issued on the endowment plan, the company agrees not only to pay the policy in the event of the death of one of the parties to the contract during the endowment period, but also at the end of the period if all the parties to the contract are then alive. Premiums on Joint-Life Policies.- The principles underlying the computation of rates on joint-life policies are the same as those used in computing the rates on policies covering single lives, with the exception that the theory of probability of death must be applied with reference to two or more lives, instead of one, in order to determine the liability of the company. Manifestly, since the company agrees to pay the policy as soon as one of two (or more) persons dies, the premium on a joint-life policy is higher per $1,000 of insurance than the rate on a policy on either life alone. On the other hand, it is apparent, that the premium on a joint-life policy covering two persons is less than the sum of the premiums on the policies insuring the two lives separately. On the two separate policies the company's liability is greater because each will involve the payment of its face value upon the death of the insured, while under the joint-life policy only one claim will be paid-i.e. upon the happening of JOINT-LIFE OFFICE PREMIUMS PER $1,000 OF INSURANCE WHEN THE AGES OF THE TWO PARTIES ARE: 31.10 32.16 35 34.06 35.01 40 38.19 38.97 27.54 28.97 54.76 65.42 80.85 30 57.20 67.45 82.47 40 30.25 54.32 60.82 70.87 85.37 45 36.50 the first death and the policy will terminate at that time. An examination of the rates on the preceding page (being those charged by a certain company) shows, for example, that where the ages of the two persons insured are 25 and 30 respectively, the rate for the joint whole-life policy is $32.16, while the sum of the rates on two whole-life policies insuring the two lives separately, viz, $19.00 at age 25 and $21.80 at age 30, is $40.80. It will also be noted that the inclusion of an older person in the insured group will materially increase the premium on a joint-life policy. Where the two persons insured, for example, are aged 25 and 60 respectively, the jointlife premium will have increased to $79.32, yet this rate is $12.38 less than the sum of the rates ($19.00 at age 25 plus $72.70 at age 60) on two policies taken out separately on these lives. The Use of a Joint-Life Policy Compared with the Use of Separate Policies on the Same Lives.- Joint-life policies may be taken by husband and wife in favor of each other or for the protection of their children. Should the husband die first, his wife and children will be properly provided for, while if the wife dies first the proceeds of the policy will also prove a substantial help to the family. Again, such policies may appeal to husband and wife who are receiving a joint income. The most frequent use of such policies, however, is for the protection of a firm against the death of one of its partners. For this reason joint-life insurance is frequently referred to as "partnership insurance," although that term, it should be noted, has a broader meaning since it may also refer to the insurance of the several partners under separate policies for the benefit of the firm. Either plan, it is clear, serves as a means of protecting the business against the withdrawal of capital and the loss of valuable experience that usually results from the death of a partner, of strengthening the credit of the firm at a time when lack of capital is most likely to prove disastrous, and of making possible the retention of the control and management of the business by the surviving partner or partners. |