Insurance
ENDOWMENT ASSURANCES.-II.
IT is customary and convenient to distinguish between endowment assurances on the one hand, and whole- life and limited payment life policies on the other; but strictly speaking, all these policies may be regarded as endowment assurances under which the sum assured is payable on attaining a specified age, or at death if previous. For whole-life and limited payment life policies, that specified age is 103, or whatever may be the latest age at which, according to the mortality table employed, everybody is supposed to be dead. Under all three classes of policies the premiums can continue throughout the whole of the endowment period, which in the case of whole-life policies is until death, or they can be limited to a maximum number which can be one, ten, twenty, or any other we choose. '- The choice of the most suitable policy is fundamentally determined by deciding what endowment period will suit us best, and whether or not payment of premiunis should continue until the policy becomes a claim either by death or survivancc.
Out of each premium that is paid, sufficient has to be accumulated as in a savings bank so as to amount to the sum assured by the latest date at which the policy can become a claim. If the endowment period is short, comparatively much must be taken and saved up. If there are many premiums to be paid, relatively little has to be taken from each to accumulate to the amount payable when the policy becomes a claim.
The obvious consequence is that the rates of premium for the assurance of £1,000 are small when the premiums are numerous and the period is long, and are high when the period is short and the premiums few. In other words, a uniform premium of £100 will secure much more life assurance in the one case than in the other. The result is that policies at low rates of premium provide more protection for dependents in the event of the early death of the assured than is given by policies at high premiums.
• If only we could foretell the time at which we shall die, there would not be much difficulty about the choice Of the most suitable policy. If we knew that death would come within ten years, we should take ten-year term insurance under which the sum insured would be paid at death within the term, and. no part of the premiums be returned to us if we survived the term. The rates of premium for such policies are extremely lbw and provide nothing but protection. If, on the other hand, we were certain of living to an advanced age, we should take policies that used as little as possible of each premium to pay for insurance protection. Under the existing Income Tax regulations we should naturally assure on a plan that involves the risk of death, since Only in that way could we obtain remission of Income Tax on the premiums, which normally means, at present, that the State pays one-tenth of our premiums. The time of death being unknown, we have to consider who shall run the risk of financial loss through early death. Clearly the one man who cannot take the risk is he whose income would cease at his death. A life office can take the risk, and would be able to make up the financial loss through death without any trouble whatever.
The third alternative is that a wife and children run the risk of the financial loss through the cessation, or substantial decrease, of income owing to early death.
If we realized vividly what this might mean, we could scarcely avoid decreasing expenditure on un- necessary things in order to provide the cost of insurance protection by means of life assurance. By doing this we should be making one of the best investments possible. On personal grounds and for financial reasons, life assurance ought to be taken to a much greater extent than it is at present. The United States and Canada have learnt its value ; some day, perhaps, England will learn it too.
WiLitiAnt Sellocn.J.NG,
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