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.