Insurance
ENDOWMENT ASSURANCES IN considering the most suitable policies for different cir- cumstances, we have come to endowment assurances, which, besides serving many of the purposes of whole-life and limited payment policies, have special applications of their own to many useful purposes. We may take as a convenient 'egample fifteen-yeaf. endowment assurances, effected at age fifty, at a premium- of £111 a year. This guarantees assurance for £1,543 with profits in addition, payable at the end of fifteen years, or at death if previous. Most of those for whom; I am writing could claim remission of Income Tax on the premium to the extent of Ell, making the actual cost £100 a year. The results are shown below :- ENDOWMENT ASSURANCE FOR 15 YEARS.
Year. Age 50. Premium £111; Sum £100 p.a.
Assured. at 31%. Tax Ell, Cost £100. Assured less E100 p.a. Value of at 3.1%. Proton- tion.
Claims per 1000.
(1)
(2) (3) (4)
(5) (6) £ £ £ £ 1
1,543 104 1,439 - 7 2 1,577 212 1,365 10
10
3 1,610 324 1,286 24 12 4 1,644 440 1,204 39 14 5 1,678 561 1,117 56 15 6 1,713 687 1,026 74 17 7 1,749 817 932 92 18 8 1,786
953 833 111
20 9 1,824 1,094 730 129 22 10 1,862 1,240 622 147 23 11 1,901 1,392 509 164 24 12 1,941 1,550 391 179 25 13 1,982 1,714 268 191 27 14 2,023 1,884 139 200 28 15 2,066 - 2,061 5 205 738 Totals 26,899 15,033 11,866 - 1,000
In examining the yield of an investment of this kind, many people would say that £100 a year for fifteen years would amount to 12,066, and, on turning to an appro- priate table of compound interest, would find that the return was at the net rate of just over /3 17s. 6d. per annum. The table shows that £100 a year accumulated at 13 17s. 6d. per cent. amounts to £2,061. As a net yield this is good, but people generally take too little account of the value of the insurance protection for which the policy provides, largely because there is no very convenient method of showing its cash value.
The column headed "Value of Protection attempts to do this. The amount in column (4) -is multiplied by the Probability of dying within the year. At age fifty the death rate is seven per thousand. By multiplying £1,439 by this rate We have /10'073 as the value of the protection. Seven death claims of £1,439 each would amount to £10,078 and would approximately be provided by each of 1,000 people paying 110. If in a perfectly fair lOttery the prize were £1, and there were twenty tickets at is. each, each man's ticket before the lottery was drawn would be worth one shilling. It is exactly the same in life assurance. WILLIAM SCHOOLING.
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