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ized for the prosecution of this business. panies is, that they are required to pay There are six chartered under the laws the entire sum assured on the happenof Massachusetts, and twenty-six of ing of a single event, making the loss those organized in other States are a total one; but in fire and marine polidoing business in this Commonwealth. cies there is a distinction made between These companies had in force, Novem- total and partial loss. ber 1, 1865, 211,537 policies, assuring A clause is usually inserted declarthe sum of $ 563,396,862.30. In 1830 ing the policy void in case the assured the New York Life and Trust Company should fall in a duel, die by the hands of was the only life assurance company justice, or by his own hand, or while enin New York. At the close of the year gaged in the violation of any public law. 1865 there were eighteen companies An interesting case in point is reportchartered under the laws of that State. ed in the English books. On the 25th They had 101,780 policies in force, of November, 1824, Henry Fauntleroy, a assuring the sum of $ 289,846,316.50, celebrated banker in London, was exewhile their gross combined assets reach cuted for forgery. The Amicable Sothe sum of $ 32,296,832.03.
ciety of London, the first company esAn insurance upon life is defined as tablished in England, had written a pol“a contract by which the underwriter, icy on his life, upon which all the prefor a certain sum proportioned to the miums had been paid. The rules of the age, health, profession, and other cir- company declared that in such cases the cumstances of the person whose life policy was vitiated, but the clause was is the object of insurance, engages that not inserted in the instrument. The that person shall not die within the company resisted payment, but a detime limited in the policy; or if he do, cision was given sustaining the validity that he will pay a sum of money to of the contract, which was, however, rehim in whose favor the policy was versed, on an appeal being made to the granted.”
House of Lords. A person desiring to effect an insur- This clause, declaring a policy void ance on his life usually procures from in case the assured commits suicide, the office in which he proposes to in- has given rise to much litigation. sure a blank form, containing a series Some companies use the word “suiof interrogatories, all of which must cide,” while others insert the words be answered in writing by the applicant. “shall die by his own hand”; but the To these answers must be appended courts of law in various adjudications the certificate of his usual medical at- have considered the expressions as tendant as to his present and general amounting to the same thing. The state of health, with a like certificate word “suicide" is not to be found in from an intimate personal friend. The any English author anterior to the reign party is then subjected to an examina- of Charles II. Lexicographers trace it tion by the medical examiner of the to the Latin word suicidum, though company, and, if the application is in that word does not appear in the older all respects satisfactory, a policy is is- Latin dictionaries. It is really derived sued.
from two Latin words, se and cædere, On death of the party assured, to slay one's self. The great comand due proof being made thereof, the mentator on English law, Sir William company must pay the full sum insured. Blackstone, defines suicide to be " the The time fixed for this payment varies act of designedly destroying one's own with different companies. Some agree
life. To constitute suicide, the person to pay at thirty, some at sixty, and must be of years of discretion and of some at ninety days after the proofs of sound mind." death have been received and duly ap- In a case submitted to the Supreme proved.
Court of the State of New York, ChiefThe peculiarity of life assurance com- Justice Nelson settled the whole ques
tion. A life company resisted payment should, in the frenzy of delirium, put of the amount specified in their policy, an end to his existence, every principle on the ground that the assured had of equity demands that the faithful paycommitted suicide by drowning him- ments of years should not be lost to his self in the Hudson River. To this it family. was replied, that, when he so drowned Another important principle, which himself, he was of unsound mind, and has involved much discussion, is, that wholly unconscious of the act.
“the party insuring upon a life must Judge Nelson, after stating the ques- have an interest in the life insured.” tion to be whether the act of self-de- Great latitude has been given in the struction by a man in a fit of insanity construction of the law as to this point; can be deemed a death by his own the declaration of a real, subsisting inhand within the meaning of the policy, terest being all that is required by the decided that it could not be so consid- underwriters. In fact, the offices are ered. That the terms “commit suicide,” constantly taking insurances where the and “die by his own hand," as used in- interest is upon a contingency which discriminately by different companies, may very shortly be determined, and express the same idea, and are so under- if the parties choose to continue the polstood by writers in this branch of law. icy, bona fide, after the interest ceases, That self-destruction by a man bereft they never meet with any difficulty in of reason can with no more propriety recovering. So also offices frequently be ascribed to the act of his own hand, grant policies upon interests so slender than to the deadly instrument that may that, although it may be difficult to deny have been used for the purpose. That some kind of interest, it is such as a the drowning was no more the act of court of law would scarcelyê ecognize. the assured, in the sense of the law, This practice of paying upon policies than if he had been impelled by irresist- without raising the question of interible physical power; and that the com- est is so general, that it has even been pany could be no more exempt from allowed in courts of law. payment, than if his death had been oc- The great advantages derived from casioned by any uncontrollable means. life assurance are proved by its rapid That suicide involved the deliberate progress, both in Great Britain and the termination of one's existence while in United States, after its principles had the full possession of the mental facul- once been fully explained. As already ties. That self-slaughter by an insane stated, the first society for the general man or a lunatic was not suicide within assurance of life was the Amicable, the meaning of the law.
founded in 1706; but, most unreasonThis opinion of Judge Nelson was ably, its rates of premium were made subsequently affirmed by the Court of uniform for all ages assured; nor was Appeals.
any fixed amount guaranteed in case of The whole current of legal decisions, death. Hence very little was done ; and the suggestions thrown out by learned it was not until 1780 that the business judges, and the growing opinion that of life assurance may be said to have no sane man would be guilty of self- fairly begun. Since then, companies slaughter, have induced several new have been formed from time to time, so companies to exclude this proviso from that at present there are in Great Brittheir policies, while many older ones ain some two hundred in active operahave revised their policies and eliminat- tion, and the amount assured upon life ed the obnoxious clause. It is not that is estimated at more than £ 200,000,000. any man contemplates the commission In America, the first life-assurance of suicide ; but every one feels that company open to all was the Pennsylif there should be laid upon him that vania, established in 1812. And though most fearful of all afflictions, insanity, many others, devoted in whole cr in or if, when suffering from disease, he part to this object, were formed in the interim, so little pains was taken to in- vantageous to the assured, we must conform the public upon the system, that sider the subject of premiums, and unin 1842 the amount assured probably derstand whence companies derive their did not exceed $ 5,000,000. But, in a surplus, or, as it is sometimes called, Christian country, all material enter- the profits. This is easily explained. prises go swiftly forward, and of late As the liability to death increases with years the progress of life assurance has age, the proper annual premium for asequalled that of railroads and tele- surance would increase with each year graphs; so that there are in the United of life. But as it is important not to States at least fifty companies, which burden age too heavily, and as it is simare disbursing in claims, chiefly to wid- pler to pay a uniform sum every year, a ows and orphans, about five millions mean rate is taken, - one too little for of dollars annually.
old age, but greater than is absolutely With this large extension of busi- necessary to cover the risk in the first ness, the fundamental principles of life years of the assurance. Hence the assurance are now universally agreed company receives at first more than on; but, in carrying them out, there it has to pay, and thus accumulates are differences deserving attention. funds to provide for the time when its
Life-assurance companies may be payments will naturally be in excess of divided into three classes, – the stock, its receipts. Now these funds may be the mutual, and the mixed. In the invested so as of themselves to produce stock company, the management is in an income, and the increase thence dethe hands of the stockholders, or their rived may, by the magical power of agents, with whom the applicant for compound interest, reaching through a insurance contracts to pay so much long series of years, become very large. while living, in consideration of a cer- In forming rates of premium, regard tain sum to be paid to his representa- is had to this; but, to gain security in tives at his death; and here his con- a contract which may extend far into nection with it ceases; the profits of the future, it is prudent to base the the business being divided among the calculations on so low a rate of interstockholders.
In the mutual company est that there can be a certainty of obthe assured themselves receive all the taining it. The rate adopted is usually surplus premium or profit. The law three per cent in England, and four or of the State of New York passed in five per cent in this country. But, in 1849 requires that all life - insurance point of fact, the American companies companies organized in the State shall now obtain on secure investments six have a capital of at least one hun- or seven per cent. dred thousand dollars. Mutual life-in- Again, in order to cover expenses surance companies organized in that and provide against possible continState since 1849 pay only seven per gencies, it is common to add to the cent on their capital, which their stock rates obtained by calculation from corby investment may produce. In the rect tables of mortality a certain permixed companies there are various centage, called loading, which is usucombinations of the principles peculiar ally found more than is necessary, and to the other two. They differ from the forms a second source of profit. mutual companies only in the fact that, Again, most tables of mortality are besides paying the stockholders legal derived from the experience of whole interest, they receive a portion of the communities, while all companies now profits of the business, which in some subject applicants to a medical examicases in this country has caused the nation, and reject those found diseased ; capital stock to appreciate in value over it being possible to discover, through three hundred per cent, and in Eng- the progress of medical science, even land over five hundred per cent. incipient signs of disease. Hence one
To decide which of these is most ad- would expect that among these selected
lives the rates of mortality would be by which the company contracts to pay, less than by ordinary statistics; and on the death of the assured, the sum this is confirmed by the published ex- named in the policy, to the person in perience of many companies. Here we whose behalf the assurance is made. find a third source of profit.
In mutual (cash) companies, when In these three ways, and others in the premium has been paid in full for cidental to the business, it happens about sixteen years, judging from past that all corporations managed with or- experience, the policy-holder may exdinary prudence accumulate a much pect that his annual dividend on policy larger capital than is needed for future and additions will exceed the annual losses. The advocates of the stock premium, thus obviating the necessity plan contend that, by a low rate of of further payments to the company, premium, they furnish their assured while his policy annually increases in with a full equivalent for that division amount for the remainder of life. But, of profits which is the special boast on the contrary, when the dividends of other companies. In a corporation have been anticipated, as in the note purely mutual, the whole surplus is system, by giving a note for part of the periodically applied to the benefit of premium, the policy-holder insuring in the assured, either by a dividend in this way, although he may at first recash, or by equitable additions to the ceive a larger policy than he has the amount assured without increase of ability to pay for in cash, may lose the premium, or by deducting from future chief benefit of life insurance. For premiums, while the amount assured should he become unable, either by remains the same. The advantages age, disease, or loss of property, to of the latter system must be evident continue the payment of his premiums, to every one.
his policy must lapse, because there is It is of course important in all com- no accumulation of profits to his credit panies, whether mutual or not, that the on which it can be continued. officers should be men of integrity, sa- In other forms of life policies, called gacity, and financial experience, as well “ Non-forfeitable,” premiums are made as that due precautions should be tak payable in “one,” “five,” or “ten ” anen in the care and investment of the nual payments. In all cash companies, company's fund; and it is now proved and in some of the note companies, by experience in this country, that, after the specified number of premiums when a company is thus managed, so have been paid, the policy-holder draws regular are the rates of mortality, so an annual dividend in cash. efficient the safeguards derived from A further advantage arising from this the selection of lives, the assumption plan is, that the policy-holder, at any of low rates of interest, and the load time after two annual payments have ing of premiums, that no company, been made, is always entitled to a when once well established, has ever “paid-up ” policy for as many “fifths ” met with disaster. On the other hand, or “ tenths” of the sum assured as he there has been a rapid accretion of shall have paid annual premiums. For funds, in some instances to the amount example: a “five-annual-payment poliof many millions of dollars. The char. cy” for $10,000, on which three premiacteristics of a good company are secu- ums had been paid, would entitle the rity and assurance at cost. It should holder to a "paid-up policy” for $6,000; sell, not policies merely, but assur- a “ten-annual - payment policy” for ance; and it should not make a profit $10,000, on which three payments had for the capitalist out of the widow and been made, would entitle the holder to orphan.
$3,000 ; and so on for any number of The policies issued by life companies payments and for any amount, in acvary in their form and nature. The cordance with the face of the policy. ordinary one is called the life policy, Another form is denominated the En
dowment Policy, in which the amount advantages which life assurance has assured is payable when the party at- conferred upon the public, especially tains a certain age, or at death, should in America, whose middle classes, amhe die before reaching that age. This bitiously living up to their income, policy is rapidly gaining favor, as it pro- are rich mostly in their labor and their vides for the man himself in old age, or homesteads, — in their earnings rather for his family in case of his death. It than their savings; and whose wealthy is also fast becoming a favorite form of classes are rich chiefly through the investment. We can show instances giddy uncertainties of speculation, where the policy-holders have received magnificent to-day, in ruins to-morrow. a surplus above all they have paid to In a country like this, no one can estithe company, with compound interest mate the amount of comfort secured by at six per cent, and no charge what investment in life assurance. It is the ever for expenses or cost of insurance one measure of thrift which remains meanwhile.
to atone for our extravagance in living The Term Policy, as its name im- and recklessness in trade. plies, is issued for a term of one or Henry Ward Beecher spoke wisely more years.
when he advised all men to seek life Policies are also issued on joint lives, assurance. payable at the death of the first of two " It is every man's duty to provide or more parties named in the policy; for his family. That provision must and on survivorship, payable to a party include its future contingent condition. named in case he survives another. That provision, in so far as it is mate
Some companies require all pre- rial, men ordinarily seek to secure by miums to be paid in cash, while others their own accumulations and investtake the note of the assured in part ments. But all these are uncertain. payment. These are denominated cash The man that is rich to-day, by causes and note companies, and much differ- beyond his reach is poor to-morrow. ence of opinion exists as to their com- A war in China, a revolution in Euparative merits.
rope, a rebellion in America, overrule The latter is at first sight an attrac- ten thousand fortunes in every comtive system, and its advocates present mercial community. many specious arguments in its favor. “But in life assurance there are no The friends of cash payments, however, risks or contingencies. Other investcontend that the note system is detri- ments may fail. A house may burn mental and delusive, from the fact that down. Banks may break and their these notes are liable to assessment, stock be worthless. Bonds and mortand, in case of death, to be deducted
gages may be seized for debt, and all from the amount assured ; also that property or evidences of property may the notes accumulate as the years roll fall into the bottomless gulf of bankon, the interest growing annually lar- ruptcy. But money secured to your ger, and the total cash payment con- family by life assurance will go to them sequently heavier, while the actual without fail or interruption, provided amount of assurance, that is, the dif- you have used due discretion in the ference between its nominal amount selection of a sound and honorable asand the sum of the notes, steadily less- surance company. Of two courses, one ens; and thus a provision for one's of which may leave your family destifamily gradually changes into a burden tute, and the other of which assures upon one's self.
them a comfortable support at your But whatever differences of opinion decease, can there be a doubt which may exist as to the comparative value is to be chosen ? Can there be a doubt of various systems, few will deny the about duty ?”