THREE REPRESENTATIVE POLICIES-THEIR
CONDITIONS AND BENEFITS
THE SCOPE OF THESE STUDIES.
HERE are plenty of text-books on life insurance and we do not intend to add to their number. On its theoretical side the subject is highly technical, and involves a considerable knowledge of the higher mathematics. Studied in the abstract it is apt to be very dry, and no one but a student, bent upon mastering his task, is likely to get through even a very simple text-book. Of course this should not deter students who have the time and inclination from undertaking the task, nor should it prevent the addition to college curricula of a course of study in life insurance.
But we have set for ourselves and our readers a very different task. While a few people need to understand the theory and practice of life insurance in its entirety, a very large number need to have such a knowledge of it as will enable them to insure wisely, to use intelligently as occasion may require the various options which the Policy contains, and to understand the relations which life insurance sustains to the state. When one understands a specific case, generalizations become comparatively easy, and the scientific study of the subject becomes more attractive; and we venture to hope that many who read these "Studies" will be led to pursue the study of life insurance on broader lines.
General Garfield tells us how, when he was elected a member of the Ohio Legislature, he attained a working knowledge of the government of the State. He reasoned after this manner: "Nothing can be done by a government without money; and so if I examine all the legal steps by which taxes are assessed, collected and expended, I shall know a good deal about the practical workings of the government of the State of Ohio." We propose to follow some such plan in the present work. The business of a life insurance company consists very largely in issuing policies of insurance and in carrying out the contracts thus made. If, then, we take up a few representative policies, consider all their clauses and follow them through all possible phases of their history-showing what the Company receives on account of them and what it does with the money-we shall know something practical about life insurance. Here, then, is a copy of the Ordinary Life Policy of the New-York Life Insurance Company, as issued in 1911:
Home Office of the Company in the City and State of New
MARY DOE, WIFE OF THE INSURED
right of revocation, upon
receipt at said Home Office of due proof of the death, during the continuance of this contract, JOHN DOE the Insured.
This contract is made in consideration of the first premium of. Two Hundred eighty-one 10/100
Dollars, the receipt of which is hereby acknowledged, constituting payment for the period terminating on
the FIRST day of
in the year Nineteen Hundred and TWELVE and the
payment of a like sum on said date and on the
FIRST
JULY
in every year thereafter during the continuance of this Policy, until the death of the Insured.
THIS POLICY SHALL PARTICIPATE IN THE SURPLUS OF THE COMPANY.
The proportion of divisible surplus accruing on this Policy shall be ascertained and distributed annually and not otherwise, and at the option of the Insured shall each year, on the anniversary of the Policy, be either
Applied toward the payment of any premium or premiums; or,
(3) Applied to the purchase of participating Paid-up Additions to the Policy; or,
Left to accumulate to the credit of the Policy, with compound interest at the rate of three per centum per annum, and
payable at the maturity of the Policy, but withdrawable on any anniversary of the Policy.
Unless the Insured shall elect otherwise within three months after the mailing by the Company of a written notice requiring
the election of one of the four above options, the dividends shall be applied to the purchase of participating Paid-up Additions
(Option No. 3) which may be surrendered for cash at any time, and the Cash Value thereof shall not be less than the original
cash dividend.
The benefits and provisions printed or written by the Company on the following pages, are a part of this
contract as fully as if they were recited at length over the signatures hereto affixed.
After delivery of this Policy to the Insured, it takes effect as of the
of. July Nineteen Hundred and eleven.
In Witness Whereof the NEW-YORK LIFE INSURANCE COMPANY has caused this contract to be signed this
Nineteen Hundred and eleven.
INSURANCE PAYABLE AT DEATH: PREMIUMS PAYABLE DURING LIFE:
1. THE CONTRACT This Policy is free of conditions as to residence,
travel or occupation. The Policy constitutes the entire contract between the
authorized to waive forfeitures or to make, modify or
parties, and no agent
discharge contracts, or to extend the time for paying a premium.
2. INCONTESTABILITY.-This Policy shall be incontestable after
one year from its date of issue except for non-payment of premium.
3. SELF-DESTRUCTION.-Self-destruction during the first policy year,
whether the insured be sane or insane, is a risk not assumed by the Company;
but in such case the Company will return the premiums actually received.
4. AGE. If the age of the Insured has been misstated the amount payable
hereunder shall be such as the premium paid would have purchased at the
5. PAYMENT OF PREMIUMS.—All premiums are payable at the
Home Office of the Company or to an agent of the Company upon delivery
of a receipt, on or before the date due, signed by an Executive Officer of
the Company, namely, the President, a Vice-President, a Second Vice-
President, a Secretary or the Treasurer, and countersigned by said agent.
The premium is always considered as payable annually, in advance, but by
agreement in writing and not otherwise may be made payable in semi-annual
or quarterly payments. Any unpaid premiums required to complete the pay-
ments for the current policy year in which death occurs shall be deducted
from the amount payable hereunder. The payment of a premium shall not
maintain the policy in force beyond the date when the next payment is due,
except as hereinafter provided.
GRACE. A grace of one month (not less than thirty days) subject to an interest charge of five per centum per annum will be allowed for the payment of every premium after the first, during which time the insurance shall continue in force. If death occurs within the period of grace the unpaid
10. ASSIGNMENT.-Any assignment of this Policy must be made in
duplicate and one copy filed with the Company at its Home Office. The Com-
pany assumes no responsibility as to the validity of any assignment.
11. CASH LOANS.—At any time after two full years' premiums have
been paid and while this Policy is in full force, the Company will advance,
on the pledge of the Policy and on the sole security thereof, an amount which
with interest thereon to the end of the current policy year and with any
unpaid portion of said year's premium, shall, at the option of the owner, be
equal to or less than the Cash Surrender Value at the end of such policy year,
including the Cash Surrender Value of any dividend additions. Interest on
the loan will be at the rate of five per centum payable annually; if interest
is not paid when due, it shall be added to the principal and bear interest at
the same rate. Failure to repay any such advance or to pay interest shall not
avoid this Policy unless the total indebtedness hereon to the Company shall
equal its Cash Surrender Value, nor until one month after notice of such fact
shall have been mailed by the Company to the last known address of the In-
sured and of the Assignee of record at the Home Office of the Company,
if any, in which event the Policy shall become void.
PREMIUM LOANS.-Whenever the net loan value of this Policy
shall be sufficient to pay one full annual premium with five per centum interest
thereon for one year, the Company will, before the expiration of the days
of grace, accept a premium lien note of the owners of the Policy in lieu of
cash for premium, said note to be a lien against the Policy and subject to the
same terms and conditions as cash loans except that the Policy need not be
The total indebtedness on this
deposited with the Company as a pledge.
Policy, however incurred, shall never exceed its Cash Surrender Value.
13. PAID-UP AND ENDOWMENT OPTIONS.-Whenever the reserve
on this Policy together with the reserve on existing dividend additions, if
any, at the end of any policy year shall equal or exceed the net single pre-
mium for the attained age of the Insured by the American Experience Table
premium for the then current Policy year shall be deducted from the amount payable hereunder.
7. CHANGE OF BENEFICIARY.-When the right of revocation has
been reserved, or in case of the death of any beneficiary under either a
revocable or irrevocable designation, the Insured, if there be no existing
assignment of the Policy made as herein provided, may while the Policy is in
force, designate a new beneficiary, with or without reserving right of revoca-
tion, by filing written notice thereof at the Home Office of the Company
accompanied by the Policy for suitable endorsement thereon. Such change
shall take effect when endorsed on the Policy by the Company and not before.
If any beneficiary shall die before the Insured, the interest of such beneficiary
shall vest in the Insured.
8. PRIVILEGE OF CHANGE TO OTHER FORMS OF POLI-
CIES. At any time, and while in full force, and provided the Insured is
then less than 60 years of age, this Policy may be changed without medical
re-examination for a Policy of the same amount, upon any plan issued by
the Company at the time this Policy takes effect and having a higher rate of
premium. Such change shall be effective upon payment of a sum equal to
the difference between the premiums on the new Policy and the premiums
paid on this Policy, with compound interest at the rate of five per centum per
annum from the due date of each payment to the date when the change is
made, and upon the surrender of this Policy. The new Policy will take effect
as of the date of this Policy, and the premium will be based upon the same age
as this Policy. The cash value of any dividends standing to the credit of this
Policy, as well as any additional cash value of such dividends that would
have been credited under the new Policy may be used in the settlement of
the difference of premiums.
9. REINSTATEMENT.-At any time after any default, upon written
application by the Insured and upon presentation at the Home Office of
evidence of insurability satisfactory to the Company, this Policy may be
reinstated, together with any indebtedness in accordance with the loan pro-
visions of the Policy, upon payment of arrears of premiums with interest
thereon at the rate of five per centum per annum.
of Mortality and interest at three per centum, for an amount of insurance
equal to the face amount of this Policy, payable at the same time and under
the same conditions as this Policy, the Company, at the written request of the
Insured, will endorse the Policy as participating paid-up insurance for such
amount as the said reserve will purchase when thus applied, any indebtedness
to the Company to be a lien against said paid-up insurance upon the same
terms and conditions as in Section 11 above; or, whenever said reserve at the
end of any policy year shall equal or exceed the face amount of this Policy,
the Company, upon surrender of the Policy and all claims thereunder, will
pay in cash the face amount of the Policy and any excess of said reserve, less
any indebtedness to the Company on account of this Policy.
14.
BENEFITS ON SURRENDER OR LAPSE.-After two full
annual premiums shall have been paid, the owner may elect within three
months after any default in payment of premium, but not later, either
(a) To accept the Cash Surrender Value; or,
(b) To have insurance for the face amount of this Policy plus any divi-
dend additions and less any indebtedness to the Company hereon continue in
force from the date of default for such term in years and months as the Cash
Surrender Value will purchase as hereinafter provided, but without future
participation and without the right to loans or Cash Surrender Value; or,
(c) To purchase non-participating Paid-up Insurance payable at the
same time and on the same conditions as this Policy. The Insured may at
any time obtain a loan on such Paid-up Insurance in accordance with the
provisions contained in Section "11, Cash Loans", or surrender the Policy
for its Cash Surrender Value.
The Cash Surrender Value, after premiums have been paid for two
years or more, will be the reserve on this Policy, omitting fractions of a
dollar per thousand of insurance, and the reserve
any dividend
on
additions thereto, at the date of default, computed according to the
American Table of Mortality and interest at the rate of three per centum
per annum, less the amount of any indebtedness to the Company, and less a
surrender charge which in no case shall be more than one and one-half
per centum of the sum insured; after premiums have been paid for ten
years or more, there will be no surrender charge.
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