Baltimore commercial journal, and Lyford's price-current. [volume] (Baltimore, Md) 1840-1849, 1848-12-16
For the Commercial Journal.
LIFE INSURANCE.-No. III.
THE MUTUAL PLAN-ITs vARIET


LIFE INSURANCE.-No. III.
THE MUTUAL PLAN-rTs VARIETIES.
In our last article we argued that the mutual plan
was the only proper and safe plan for the public to
support-but there a variety of organizations
on the mutual principle, il becomes the interest of
the public to investigate the details of these,
rally, before giving their countcnance TO either.
The leading features which are set forward by diff
ferent American companies, to gain public conf
dcnce, are
LIST. Credit on Premiums.
Cd. Immediate distribution of profits among the
Insured.
Sd. Convenient transfer of Policies
18th. Reservation of profits to long lives.
As il would require more space than il is conve-
nient to spare, TO discuss the merits of all these
points in article, will conine ourselves to the
first popularity known as the Credit System" This
is the most important Of them ALL because its results
most likely to be pcrncious TO the community; and
because it will prove be- although may not have
been intended as fraud; dcccving both the insurers
and the insured. Every credit given premiums,
lessons the soundness Of the institution granting it,
and the value, not only Of the policy which the
credit is granted, but also of those policies which
cash premiums have been paid.
To establish position, will suppose that
company has been organized, who agree to insure
life at the usual rates, and to receive the premiums
% per cent. in cash, and rs per cent in notes at IL
months bearing interest In the course of time they
have in force thousand policies, averaging in
amount $4,000, at the average age of thirty. The
annual income $40 ,S00-provdcd the whole Of the
payments were cash. But, the plan above
toned only $l7,700 would be received per annum,
from premiums, in cash; while notes Of hcnd amount
ing TO 1913 100, and averaging 1858 10 each, would
be received annually, from members scattered over
the country. Now leave it TO business men TO
decide, whether they would give rs per cent. for
these bills taken altogether? Yet they all rcck
oned par among the published statement of assets.
An American company of this sort, had, in Scpiem-
Der, 1913, at one Of their agencies, premium notes
due and unpaid, amounting To $4,000. Does any
business man suppose that the profits of the cash
paying members in such company would not be
rously diminished by the extra expenses and losses
attending the collection of premium notes?
But may be argued that these notes will be paid,
because otherwise, the policies become void. The
notes sickly risks will doubtless be promptly
lifted, while the healthy, finding their Indebtedness
to the company annually increasing, will perceive
that, should they continue giving notes every year,
at death, their debts to the company would very
nearly consume their policies. They will then find
it necessary to decide whether TO abandon their poll
cies increase the debt TO be deducted from the
provision they wished TO make for their families,
whether they will pay mp arrcarages, and continue
on the cash principle altogether. In vast number
of cases 1t will be found next to impossible 10 collect
the unpaid notes of such as abandon their policies.
"Ye speak from The book"
We have said above, that the credit system would
prove TO be- though it might not have been intended
as, fraud. by the following remarks and calcutta
ton, taken from the pamphlet OF a company in New
York, il will be that while the advocates of the
credit system profess TO afford the accommodation of
the of threefo urths of the premium, and at the
same time TO give insurance equal 10 that of the
cash system in fact, the interest on the notes brings
up the annual payments during the latter part Of the
life much higher than cash premiums would have
been AT the same time those who reflect will per-
ceive that members, the credit system taking
with another, cannot possibly be insured TO greater
amount than that which strictly cash premium
equal to the amount of their fourth in cash, would
purchase,
The Credit Plan Of Mutual Life Insurance consi-
dered. and its unsatisfactory and dangerous ten
denotes opposed
We have abundant evidence from the experience
of Mutual Life Insurance Companies in Great Bri-
tain, that Mutual Life Insurance, organized and
Quoted upon correct cash principles is decidedly the
safest and most beneficial of any system yet devised,
and it is thus viewed by the abcst writers on the
subject. Upon the defective and unstable principle
of credit, it dangerous and unsafe and is consi
dcred by the writers. 1t is axiom in the
purely mutual system Of life insurance, that the sta
bilty of the institution, and the prospective benefits
growing out Of it, rests upon the premiums paid by
the insured; if these in their promissory notes
instead of cash. it will be shown that the advantages
expected from the insurance will not be realized 1t
then being fundamental principle, that the means
TO meet losses and expenses are derived from the
premiums, therefore, the ground of security and
benefits, the cash system is decidedly the best and
only safe PLAN company departing from this rule.
and substituting the notes of the insured instead of
cash, weakcns the institution. and dminishcs the
benefits in proportion to the extent to which the
principle is carried out.
We will now examine and show the practical
working of Mutual Life Insurance Company regu
lated upon the principle of receiving premiums in
cash, and in the promissory notes OF the assured.
party, aged IS years, takes out policy with a
upon such plan, for the sum of $4,000,
for the whole continuance of his life, at the annual
premium of s 1877. so each aud every payment TO be
made in cash and : in notes The expectation Of
this life by the Carlisle table is 81 years; he would
then have TO make 3 annual payments to the COM
pany of $l37, so each, the cash part 1874 81, note
s 1918. The notes drawing interest at the
rate Of per cent. per annum, payable annually.
The cash payments on the ascending scale. The
suboincd table exhibits the progressive increase Of
the cash payments and the accumulation Of premium
notes from the commencement TO the termination of
the policy.