Eaton weekly Democrat. [volume] (Eaton, Ohio) 1866-1875, 1873-10-16
life insurance. What rs
EegSF

To whom does the money in a
mutual life insurance company
belong? This question has be-
gun to attract public attention,
and should it get into the courts,
it is destined to produce impor-
tant effects on the companies
themselves.
The aggregate OF this money
at any time consists of what is
called the company's reserve,
with more or less surplus, or none
at all. The surplus, if any eX-
lists, is divided from time to time
among the policy holders, more
or less equitably, by methods
which we do not now propose to
discuss.
The reserve is regulated by
law, and must Come up to a Ger
tain standard, or the company
will probably be bligtd to do
one of two tl,ing~: either to rein
sure, that is, to transfer both its
risks and its funds To some other
company willing to take them;
or to liquiGate, that ia, to divide
the funds among the members, a
process perhaps which is yet to
take place for the first time. If
it should ever take place. it will
have to be governed ly pure
principles Of equity, for by the
policy or contract between tie
individual member and the com
pany or corporation, no individ-
nal right in the reserve prior to
the termination of the policy is
at all defined. This contra 1t, by
an astounding oversight, neither
provides for the case Of liquida-
ton, nor for its own cancelIa-
lion, except by ~exacting the for
fixture of the entire interest in
the reserve as the penalty ofdis-
continuance. 1t sometimes pr
vides for cancelling IL part of the
insurance and continuing the
rest on the discontinuance of
payments, and that without much
pretence of equity.
But though the contract itself
seems to place the rights of the
individual beyond the reach of
equity proceedings in court, the
prospectus and practice of the
company may perhaps bring
them within the range of those
, broad proceedings, and If so, by
, and by something Interesting
will occur. For example, a com
pany's prospectus often engages
| that a party may surrender bis
policy, after it has ruu say two
or three years, and receive an
equitable consideration'in cash
And cash considerations, equita-
BILE or otherwise, are actually
paid. Now under this state OF
things, suppose q party WHO be.
= lieves that he has not reen treat
, ed equitably-thut he has not re.
ceived as much compared with
his just claim as others have
should file a bill in equity agains.
the company and sustain it by
), unanswerable proof, what woul.
i happen?
Such bills, capable of the clear
est possible proof, if we are cor
& rectly Informed, can be brough
! by hundreds and thousands. Fo.
j example, suppose two parties
have each insured for life III the
, sum of $10,0 900, at the age of 80
= and one, A, has paid three pre-
I miums, and the other, b, TWEEN
ty-five. The law of this State re
quires the company to have il
reserve $24O,6O against AS poll
cy and S2,965,3O against BIS
= This is, in fact, the amou-t at 4:
per cent. per annum, of wha
each has paid beyond the norma
cost of the insurance he has en-
! joyed, his share OF the expense
8 and the dividends of surplus re
n turned to him. If tho compan.
were to liquidate on the exact
legal reserve, these sums would
unquestionably be the exac
shares which A and B, respec
t lively, would receive.
: But suppose instead of thi
4 they have surrendered at the enc
of three and twenty-five years
i, being both of uneXceptionabl'
= vitality, the n neither more no
t less SO than the other, and eaci
has received according to th'
l common rule and practice of tn,
companies, one half the legal re
8 serve on his policy, that is, 4
! $4,000 and b $1,467,65. Com
pared with an equitable liquida
ton, this would be charging i
$1,347,35 mole for c~anceiling Iii
policy than A was charged. Ant
yet 3 would have no difficulty il
f proving to the satisfaction of any
/, equity court with a spark of eq.
uity IN it, that the fresh policy o.
A, twenty-five years younger
was more valuable to the compa