The Indianapolis journal., 1886-01-08
SEMI-TONTINE LIFE INSURANCE.
An Expose Of the emi-Tontine Methods.
It's Elements the Same as Full Tontine and
Equally as Objectionable.
New York Tribune.

To the Editor: Sir-The recent discussions of
Tontine have clearly shown--what has not been
denied--that the profits of pure Tontine are the
forfeitures of the entire reserves and surplus of
those who lapse their policies, and OF the sur
plus of those who die, during the Tontine period
that all who enter a Tontine class put, there
fore, at continual hazard during the entire Ton
tine PERIOD not only the reserve and surplus paid
IN by them. but what is of far greater public
Importance, they put at such hazard the paid-up
insurance which this reserve and surplus ought
to buy for their families that in fact millions OF
dollars of such paid-up insurance are now being
sothatpure Tontineis simply speculation in the
paid-up pinsurancefor ones family which aman has
really paid for and to which they are fully en-
titled, but which he chooses to risk their losing
IN the hope that he may chance to get share
IN the reserves and surplus of other insurers
who have had to let their policies lapse and so
made their families lose the paid-up insurance
which their reserves and surplus had paid for.
The Tontine companies, while still asserting
the moral soundness and protective value of pure
Tontine, have nevertheless laid significant stress
on the fact that they are now urging only the
seui-Tontine, or limited Toptine. or non-forfeit-
ing Tontine, reserved dividend. distribution pol
icies etc. in which it is repre- sented that only
the surplus is to be forfeited in case of lapse.
and that paid-up insurance is to be given for the
reserve; so that might feel that he was
risking his family's protection only to the ex-
tent of the paid-up insurance which his accumu-
iations of surplus might and ought to buy for
them, the desired inference being that this re-
duces it to small affair in point of amount, and
harmless one In point of morals. The bait IN
all these variations of Tontine is the expectation
that by postponing all dividends for five, ten
fifteen or twenty years those. VINO are lucky
enough to live and pay through will get extraor-
dinary dividends by getting those earned and
forfeited by other people, in addition to their
own honest earnings. AS if there were any 9TH
er legitimate phase of life insurance than simply
taking policy to protect those who need the
protection, getting it at just its own proper
yearly cost according to its share in the
yearly risk, and securing all its benefits, beyond
all hazard. to those who need it and have right
to rely it, and not to find in the day of their
necessity that their protection was put at stake
on a needless speculation, either in whole or in
part.
LIMITED NON FORFEITURE.
The partial non-forfeiting element is brought
into these modified Tontine schemes by way of
the New York non-forfeiture law, which pro-
as they may be by those who want full Tontine
whenever policy lapses after making three
full payments, the holder shall be entitled to so
much of paid-up policy as the AZ per cent.
serve will buy, taken as a single premium at the
company's published rates" provided he sur
render his policy within six months. The COM
paries pare this reserve to start with; they actu
ally do and must carry a per cent. reserve; but
they use only Al per cent. reserve in giving
Yaf d.f1p iOcr fk0 a fn fhQ
Tontine pool; and this difference during twen-
ty-year Tontine period runs from to 10 per
cent. of the reserve For instance, a who
has been insured for five years for $40, 600, enter
ing at thirty, they have a per cent. reserve of
$t59-28, but they use Al per cent. reserve,
Salt. 49, difference to the pool, $42 15; when he
has been insured nineteen years they hold a
per cent. reserve. So, 263 a.; hut they use for
paid-up insurance only s., 1885, difference to
the pool, $l4709.
OTHER MARGINS FOR ToNTINE.
So secretly have the single premium rates of
these companies been published" that until
recently have been unable to procure a copy,
so as to see just what effects on Tontine results
the actual application of the New York law
might be expected to make. The question was
the more curious since, with all the boasted
equity of semi Tontine, its estimated" specula-
tive result was expected to be, as stated in my
letter of May 10, within about Ii per cent. that
of full Tontine, which would not be possible il
anything like the full reserve were really used
to give paid-up insurance.
From a table of single premiums printed in
this year we find that these companies take a
margin on their single premiums of just so per
cent. Of the net; SO that using the Al reserve
single premium, one-third of it is taken as mar.
gin or loading: most companies have hitherto
loaded their single premiums only about 10 per
cent; as the paid-up insurance given under the
New York law shall not participate in the
profits of the company" that so per cent load
ing. or one third the premium, is clear Tontine
profit.
Sem-Tontine profits from Iapses are therefore,
first, the entire surplus second. 10 per cent. of
the reserve; third, one-third of the remainder
THE PRACTICAL EFFECT.
1t works this way: Take 900 men insured
at age thirty for $4,000 each ordinary life,
twenty year semi -Tontine, upon the Equitables
estimate" that those who live and pay through
the twenty years will get sc. 800 in cash; the
man who has to give up at the end of five years
would have in the pool $937 OIL, of which $3.50. O8
would be the per cent reserve and SAT-. SO his
interest in the surplus the latter he loses out
right to the pool; $40. Is is then taken from his
reserve to reduce it to a Al per cent reserve,
and goes to the pool; the remainder. $416. SO. is
used as single premium, loaded so per cent. to
buy insurance that will not participate in prof.
lis, OI goes 10 tue pOOI,
or $l38. 81 $751; II has been taken out of his re-
serve $27796 has been actually used to buy
non-participating paid-up insurance, if he sur
rendered his policy in time; out of his
$93701 he has lost to the pool $477 90
surplus and $l81. IL from reserve, total of
1868. 05-over 20 per cent. of all he had in. and
what ought to have given his family about So, 900
of paid-up Insurance.; that is what semi -Tontine
means for him and his family.
The man who has been liz ten years and has to
lapse, has in the pool So 32l8 49, of which ST. OlO IL
is per cent. reserve and 81, Bill rs in his inter
est in surplus; the latter ne loses outright to
the Tontine fund; $83. 80 is taken from his re-
to reduce it to Al per cent reserve 1926. 73,
one-third of which, or 1908. 91 is taken for
Tontine profits by way of loading; so that only
$61z82 is actually used to buy paid-up non
participating insurance, and he has lost to the
pool 1892 80 of his reserve and rs interest in