Insurance
THE MOST SUITABLE POLICY.-III.
Tmi three principal types of life policies are : whole-fife. limited payment life, and endowment assurance. The necessity for, sometimes the duty of, taking whole-:. life policies has already been pointed out. The premiums are payable throughout life and the sum assured is paid- only at death, whenever it happens. The amount of the policy has to be accumulated out of the premiums by the latest date at which, according to the mortality tables employed, the policy can become a claim. Conse- quently the premiums are small and there is a large amount of protection for dependents. If we happen to 'die moderately soon, the boon for others is extremely' great, but if we live to an advanced old age, we may wish we had taken a different policy, but it is far better to risk a trifling disappointment many years hence, than to run• the risk of leaving dependents unprovided for.
Limited payment policies also mature for payment only at death, but the premiums are limited to any number we choose. The result is that the premiums are naturally • higher and make less provision for others in return for a given annual outlay than a whole-life policy. These 'policies are, in fact, intermediate between whole-life and 'endowment assurance.
` This latter type of policy provides for the sum assured to be paid at the end of any number or years we choose, and the premiums are usually paid throughout the whole of the endowment period, although, if desired,' we can pay for the policy by a single premium, or limit the premiums to any number we like. The premiuths, of course, cease it death occurs within the endowment period. These endowment assurance policies serve many different purposes. If they are taken for long periods; ,such as thirty years or more, they provide a large measurd of protection for dependents and at the same time provide ia capital sum for our own old age. If the endowment 'period is quite short, such as perhaps fifteen years, they. are an extremely profitable investment which, largely 'on account of the Income Tax regulations, may yield interest at a net rate of 5 per cent. or more. The Govern= ment pays, perhaps, one-tenth of the premiums for us by allowing remission of Income Tax, and the interest on our 'investment, which is a very important item, pays Income Tax at about 2s. 6d. in the instead of the 4s., with perhaps Super Tax in addition, that has to be paid on the dividends from other investments.
Endowment assurances for short periods are also almost invariably the best way of providing for the expenses of education. The policy is effected on the life . of the parent and matures for payment at the time when education is becoming most expensive. If it happens that the parent dies earlier than this, most companies will retain the sum assured, if desired, paying interest upon the money and ultimately paying instalments, for educational expenses, for three, five, or seven years: The result is that the cash cost of education is very much decreased, because interest is earned on the money and -remission of Income Tax is allowed on the premium. In addition to this, we have to make a relatively large number of small payments, which is frequently more convenient than a small number of large payments made out of current income while education is going on. For long periods, such as- thirty years, there is much that is attractive about endowment assurances. If they are effected sufficiently early in life, the rate of premium is so low that they yield a large measure of protection for others, and at the same time make pro. . vision for our own future years. The best time to start a policy of this kind is at the birth of a child. The , premiums are accumulated until age 21 or 25, when the policy comes into force for the full sum assured and "begins to share in the profits. - Thus, while I have urged strongly the advisability of ;whole-life and limited payment life policies, I also recog- nize to the full the advantages of endowment assurance, 'which I shall explain in some detail in future articles.
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