Page:Popular Science Monthly Volume 5.djvu/128

118 last chapter, showing his liberality of view. It is to be hoped that the publishers will find it for their interest to modify the price of this work, so as to bring it within reach of a large circle of those who, in our opinion, would be glad to have it.

object of this work is to call public attention to certain practices in the existing system of life insurance, entailing loss and injury upon the policy-holder. Chief among these practices is the treatment of holders who allow their policies to lapse by non-payment of the premium, or surrender them from a desire to change the investment. In either case it is usual for the company to issue a "paid-up policy," that is, a guarantee to pay a fraction of the original policy at the expiration of its tenn, or to pay the resigning policy-holder a small sum of money as the "surrender value" of the policy. Mr. Wright assumes, and it must be confessed with great show of reason, that the "surrender value," in all cases where the policy has existed beyond three years, and in some cases beyond one year, is far less than the amount the policy-holder is justly entitled to receive. According to his idea, legitimate life insurance is a compound of insurance proper with the savings-bank business, and his system is therefore termed Savings-Bank Life Insurance. From this point of view all premiums paid are resolvable into two parts. One part pays the cost of insurance, that is, the expenses of the company: the other is merely a deposit, in trust with the company, for gradual accumulation to equal the sum of the policy by the time that that shall become due. Either part may be larger or smaller, according to the nature of the policy. With "ordinary life" policies, the premiums are small, and distributed over a great number of years; there is, therefore, great risk that the company will have to pay the policy before the accumulated deposits can yield a sum to equal it. To compensate it for this great risk, the company is justified in taking for itself the largest part of the premium. But, in the case of an endowment policy of short term, the premium being large and confined within a few years, the deposit accumulates very rapidly, and will soon equal the policy. There being, therefore, much less risk than in the former case, the company can be justified in taking only a small part of the premium for its own use. Thus it is plain that the company's share of the premium is largest in the case of an ordinary life policy, and smallest in that of a short-term endowment policy. It is called the "insurance value," and is appropriated to the payment of the expenses of the company. The policyholder's share of the premium is smallest with the first kind of policy and largest with the last; it is called the "reserve," and should never be touched for any other purpose than the payment of the policy to which it belongs. Mr. Wright contends that the policy-holder should be at liberty to return his policy at any time, and withdraw the "reserve" unimpaired, save in a small sum to compensate the company for the loss of a good risk. In some cases the policy-holder is entitled to recover more than the "reserve" when he surrenders his policy. This occurs with "single-premium policies"—policies on which many future small premiums are anticipated, or commuted by the payment of a single large premium. This single large premium, like the small annual premiums considered above, resolves into two parts, the "insurance value" and the "reserve." The "reserve" is the same in nature as with the annual premium, though of course much larger; but a new element enters into the composition of the "insurance value." The "insurance value" of an annual premium compensates the company for its risk in one year, while the "insurance value" of a "single premium" compensates the company for its risk during all the years that the policy has to run. Now, if the holder of a "single-premium policy," having twenty or more years to run, becomes desirous to surrender his policy at the end of five years, he should get back from the company, not only the "reserve," but also that portion of the "insurance value" that has been set apart by the company to compensate for the risk attached to the remaining fifteen or more years of the policy's term.