Port Tobacco times, and Charles County advertiser., 1872-06-07
From the chronological Journal
ON LIFE INSURANCE.
M l.


on the subject of Life Insurance, it re-
mains matter of deep mystery to large
number of intelligent people 1t would
appear that the idea that life insurance
was beyond the comprehension of common
people had been purposely kept up in for
mer years; at least no special pains were
taken to make it plain. Yet the priuci-
piles upon which this science is founded
are just as simple, and much more certain
in results, than the principles upon which
fire insurance is based It shall be our
object to treat this subject from popular
and common-sense standpoint, rather than
to discuss any scientific or actual prob
lens. ..... =
The precise origin of life insurance is,
as Lord Dundreary observes, zone of those
things that no fellow can find out" 1t
seems to have been practised in some rude
forms in the earlier part of the sixteenth
century. The idea of mutual insurance
was plainly hinted at, if not quite develop
ed. in the ancient Saxon guilds. There
we're no data to speak of to 90 upon in
those early days, and instead of mathe-
matical science. there~was blind betting
on chances In fact, insurance wagers''
of many absurd forms soon came to be
practised with as much zest as any other
game of chance. Not only were insuran-
ces, so-called. made against all possible
mishaps to person or property, but there
were insurances against lying, against
highwaymen, and against divorces! A
scheme was started for the insurance of
female chastity; and another, on which
large sums were paid at Lloyds, on the
success or failure of a young fellow who
had undertaken for wager to 60 to Lap
land and bring back, within given time.
tUo reindeer and ta0o Lapzand women
He did it, and won the wager.
The foundation of life insurance. as a
system, rests upon the ascertained law of
mortality, or average death rate. 1t was
long ago discovered that certain law of
average prevailed as to the number Of
deaths, the number of accidents, the num-
ber of suicides, the number of murders,
etc. But statistics had to be gathered for
many years and carefully studied before
this law of average could be reduced to a
system. Mortality tables were construct
ed by learned mathematicians, and these
have been tested and modified by more
than hundred years. experience in Eng
lish life companies. and upward of thirty
years in our own. till the computation is
reduced very nearly to the exactness of
the multiplication table,
Take one thousand men, of given age,
and we know that certain number will
die within year; but it is impossible to
make selection, and say, ''This man
shall die; that man shall live." Nothing
is more certain than this law of average
as applied to the mass; nothing more un-
certain as applied to the individual Sup
pose all of this thousand men to be in good
health, and each aged thirty-six years.
The ''expectation is that all would live an
average of thirty years longer; yet doubt
less some would die within one year, and
others might live to the age of ninety or
a hundred To insure each of those men
1000, payable at death, each should
pay an annual sum sufficient, if judicious-
ly invested, to amount to 81 900 at the
end of thirty years. That annual sum
would represent the net cost of insurance,
pure and simple. Add to it such per
cent. as will cover the necessary cost of
transacting the business. and you have
the proper premium for that insurance.
What company would lose on those dy-
ing before the expiration of the thirty
years, would be made up by those who
lived longer than thirty years. There are
many plans of life insurance; but, if sound,
all are founded On this basis.
ln computing tables of premiums, low
rate of interest is assum med-four per cent.
in Massachusetts. four and half per cent.
in New York-so as to be safe from pos
sible fluctuations in the income realized
from investments. To this is added
percentage, varying from twenty to forty
per cent, to cover the expenses of, obtain
ing and transacting the business, such as
salaries of officers, clerk hire, rent, COM
missions to agents. etc. This is called
the "loading' Like other branches Of
business in trade or manufactures, money
has to be expended freely to gain business.
Few people go to life insurance Offices and
ask for insurance-they wait to have it
urged upon them by an agent or solicitor.
There are many companies all sharply
competing with each other, and it is found
necessary not only to educate people in
the knowledge and benefits of life insur-
ance, but much money is spent in adver-
tising the particular advantages claimed
by any one company and its plan over
other companies and their plans.
Contrary to general practice in fire iu-
surance, the great majority of life insur-
ance corporations are mutual, so-called.
The premiums of the members form the
fund which pays all the losses and expen-
ses, and piles up the reserve fund neces-
sary to meet future liabilities. At the
outset, therefore, there is only guaran-
tee capital, pledged by those who form
the company but as years pass on and
the company grows old and successful.
the fund increases like rolling SNOWFALL