Essential Types of Policies
To Meet All Requirements
WITHIN recent years controversy has been rife over the question as to which is the better form of policy from an economic point of view—the " with profit " or the " with- out profit " policy. Their relative values are, indeed, a perennial subject of discussion. In regard-to " without profit " insurance the sum assured is, of course, a fixed one, and in the earlier years of such a policy it is sub- stantially larger than could be obtained for the same premium under a " with profit " policy. tWith profit !' premiumaare calculated with the object of their earning a divisible profit. They are fixed to cover the actual cost of the assurance, and also to provide a sum for investment on behalf of the assured as well as a-margin for contingencies. It can be taken for -granted that a life office can make better use of the investment portion of the premium than the assured himself can do. A company has infinitely greater facilities for investment than an individual, while, of course,- the difference between a single premium on a " without profit " and a " with profit policy is relatively so small as to make the individual investment not worth the candle.
FOUNDATION PRINCIPLE.
The cheapest form of policy is not always the best. In considering the merits of one form of policy and another, one must necessarily take into account the circumstances of the person requiring life assurance. That, precisely, is the crux of the whole thing. The foundation principle of life assurance is the provision of a fixed sum of money for the benefit of a wife and family upon the death of the husband and father. That provision is simplified in a non-participating whole life policy, under which pre- miums are payable throughout the life of the assured. For men of limited means, whose sole aim is that at their death a substantial cash payment should be made to their dependents, this is an adequate type of policy. In later years limited premium policies have become more popular than those upon which the assured has to pay premiums until the end of his days. That obligation-may conceivably become very burdensome. In the early years of a man's life, and even later, while he is in pos- session of his earning faculties, premiums can -be paid without undue hardship or difficulty ; but when a man reaches the autumn of his life, and especially if he he not too well blessed with this world's goods, lie may be hard put to it to keep up his payments regularly.
THE INVESTMENT STANDPOINT.
From an investment point of view the " with profit " policy is deservedly popular, and, in spite of what its critics may say, it is not in the least likely to shed any of itA popularity. The salient feature of such a policy is that while the premium is fixed, the amount of the assurance is continually "increasing by the addition of bonus until, in the case of one who lives to attain old age, an assurance originally of modest amount may become very substantial under this fruitful influence. The fact that, up to one-sixth of his total income, a Man may deduct from the amount upon which lie has to pay income tax ; the money he pays in life assurance premiums, ought to stimulate the insuring public to increase its holdings, of life assurance. It has, at any rate, an efficacious effect upon the earning power of savings through the 'medium of life assurance, in comparison with investments in interest and dividend bearing stocks and shares.
" With profit " endowment assurances have proved more .popular than endowment assurances without profits. This is not . surprisingi, because when .a man takes out an endowment assurance he does so with the intention Of building up a considerable sum of which, if he lives to the end of a fixed "term of years, he will then be able to have the personal use. Meanwhile, should he ' die before the end of that period is reached, his wife or other dependents mould. have the benefit of it. Choice of a policy depends entirely upon a man's resources and the circumstances for which he wishes to provide: A DUAL CONDITION.
Again, looking at the subject from an investment view- point, there is a good deal to be said in favour of a form of insurance which places in the hands of the policy- holder, when he attains a mature age, a substantial sum of money to be dealt with as lie likes. It is essentially intended as a provision for old age, coupled with the fundamental condition of creating something to help the family should the head of it shuffle off this mortal coil prematurely. There is a great charm about such a policy. Under what are known as option policies there is in vogue an attractive system of variable assurances which lends itself readily to application at will to the wide variety of circumstances in which people find themselves when they arrive at the wrong side of fifty. Years ago a young man was placed at an obvious dis- advantage by having the necessity placed upon him of choosing immediately and finally one kind of policy or another. Nowadays the insuring public is offered a great variety of policies under the conditions of which the assured is not required to select the form the benefit will ultimately take, until a certain amount of time has elapsed after the policy has been taken out. The advan- tage of this option is that at the end of a given period of years the policy-holder will be much better able to determine as to how the benefits of life assurance will best befit his circumstances.
VALUABLE OPTIONS.
The system of option policies rests upon the fact that endowment assurance gives the policy-holder a sum of money at a fixed point during his lifetime. The option policy enables him to tdke it either in cash or in kind, or in a combination of both ways. For example, instead of payment in money he may find greater use for a life annuity, or for a fully paid-up life assurance payable at death, or for both of them together, or for either or both of them together with a certain amount in cash. To one point, which may very possibly be overlooked by the majority of people, attention may usefully be drawn. It • is that a man's life assurance policy forms part of his estate, and should he be overtaken by financial misfortune, his policy may be commandeered by his creditors and be used, in part or in whole, for the liquida- tion of his debts. He can 'avoid this risk by having the policy assigned to his wife, or to his wife and children, fOr their own benefit entirely.
PROPERTY OF THE WIFE.
Men who have to take commercial risks surely owe it to their wives and families to make sure that their life policies are not business assets. The law lays it down that if a policy taken out by the husband is assigned to his wife, the policy is hers, and forms no part of the husband's business assets. If, at the time of taking out the policy, the husband is solvent, the policy, so assigned, becomes the absolute property of the wife. The wife may even dispose of the policy during her lifetime, and She is at liberty to leave it,-by will, away from the husband if no such words as " if she survive " are inserted in the policy. If the contrary is the case the policy, in the event of the -wife dying first, would revert to the husband.
The husband has no control of a policy issued under the Married Women's Property Act. He could not raise a loan on the policy without obtaining his wife's consent to the transaction. These are a few of the points which may not be generally known. There are, doubtless, many others. Insurance, after all, is a subject exceedingly wide in its scope and ramifications, and it behoves the public, in its own interest, to take cognizance of the numerous features which it presents.
COPTHALL.
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