Insurance
HOW MUCH I SHOULD ASSURE FOR MANIFESTLY the amount of life assurance that each man should have depends partly upon his income, and partly upon the responsibilities that he has for the well-being of dependents. There may be exceptional cases in which the owner of a substantial capital need have no life assurance at all, but even he is probably missing a better investment than anything he at present has.
The majority of men and a number of women ought certainly to be assured, and it would at least be a useful exercise for such people to think out how much life assurance they ought to have, even if they have no present intention of increasing their life assurance to the appropriate amount. There are sundry considerations which may well be borne in mind when attempting to solve this problerh. Probably the majority of men have other people dependent upon them, and if the men die, the women and children are less competent than they to earn an adequate income. The first thing is that we should think in terms of the income that will be available, rather than of the capital sum. A policy for £1,000 may seem fairly sub- stantial to some people, but if that is all the provision that is made, the income may be only £50 a year, which is paltry. One standard which cannot be considered a high one is that the income available after the man's death should be one-fourth of what it was when he was living. A man who is earning £1,000 a year should on this basis leave an income of £250, which requires a capital of E5,000. Having deducted the value of any securities that may be available, there should be a life policy for the balance. If we assume that the -balance is £4,000, and the rate of premium £30 per £1,000, this means an annual cost of £120.
A kindly and sensible Government paYs part of our premiums for us, beeause it allows remission of Income Tax at half the -standard= rate of tax in most cases. At present this is equivalent to the Government paying one-tenth of our premiums. Under this system, another standard has 'been set up, which is that the annual cost of life assurance should be one-sixth of a man's income, or £166 a year out of an income of £1,000. The Govern- ment allows remission of tax on premiums to this extent. The valuable concession is made because life assurance to this extent may be regarded as. a necessity for indivi• duals, and because it is beneficial to the community that such provision should be made. Another criterion is that established by the Pensions Act of 1925, under which the widow's pension is approxi- mately one-sixth of what her husband's income was. On this basis a man earning £1,000 a year should leave some £3,340 for his dependents. There is, however, another aspect of the problem. It is not wise to effect more life assurance than can be paid for, and what with education and other expenses, it is often difficult to find the necessary money for life assurance premiums. In these circumstances it is easy for a moo to persuade himself that he will increase his assurance on that " To-morrow " which never comes. It is easy to refuse to visualize what will happen to his wife and children if their income in large measure ceases at his death. He may think he can " take the chance of living until his children have grown up ; of earning a larger income, and having less expenditure in his later years, and so of being able to leave a satisfactory income after his death. Unfortunately he cannot take this chance. _It. is those who' are dependent upon him who take it, and the consequ-ences of doing so may be extremely disagreeable. Life assurance is full of resource,. and there are endless ways in which it can be effectively_ adapted to the most diverse conditions. Some of those plans I shall describe in these articles from week to week. There are methods by which life assurance protection can be obtained at an extremely low cost, and there are others that enable the wealthiest men to make a safer and more remunerative investment than can, as a rule, be obtained in any other
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