Morning journal and courier., 1891-01-17
THE INVESTM MENTFEATURE
Life : Insurance Policies.

| Life Insurance Policies.
Very few Agents or Companies offe
their policies to-day solely as protectio,
to the family, Or dwell upon their adapta
ton to that purpose, or urge them fo
that motive. .--
The policies, or ''bonds' or "consols'
of the eager great rivals are offered as al
investment to the taker, upon fgure6
estimate of their future outcome, and ART
urged for the personal profit Of the taker
In legitimate mutual life insurance, tht
yearly death losses, expenses and interest
earnings are carefully adjusted, and the
result apportioned to each policy, SO that
each person is yearly charged with just
the yearly cost of carrying his risk, and
the remainder of his premium is RENTED
by way of dividend. He thus knows
the exact cost of his insurance from year
to year and pays that, and no more.
But the Investment policies" "bonds, u
''conso1s," etc., adopt contrary course.
The entire annual premium or ''install-
ment" is to be paid in full, without any
reduction, for the entire Investment
period" ten, fifteen, or twenty years. No
adjustment or apportionment of losses,
expenses or earnings is made during that
period no dividend declared or paid no
means of ascertaining what the cost of the
operation is from year to year: no means
of knowing what the real outcome of the
speculation is likely to be for no state
ment of account can be called for by any
person, either during the Investment
period" or at is close. The holder of the
policy or "bond" or ''consor' has to bind
himself in advance in his application, to
take whatever is given him as the profits
of his venture without account or ques-
ton.
Is THIS INVESTMENT OR SPECULATION?
Investment, in the proper and conserva
tive sense, means putting money into a
scheme of use, the expenses, profits, and
losses of which are we'll foreseen, the fuc-
tuations capable of reasonably safe pre-
determination, and themselves, therefore,
capable of being SO weighed and balanced
that profitable result can be forecast
within safe margin.
Speculation means putting money into
scheme, the expenses, profits, and losses
of which are not well foreseen, or are like
1y to fuctuate SO irregularly, widely and
uncontrollably that they cannot be truly
weighed and balanced, nor the outcome
brought into any margin of safe calcula-
ton; scheme in which gain and loss are
alike possible, and alike uncertain both as
to the fact and the degree of either.
Investment knows and weighs the
chances and ascertains the balance to be
safely on the right side.
Speculation does not know and cannot
weigh the chances, but simply takes them.
HOW CAN A LIFE INSURANCE COMPANY
MAKE MONEY.
It has two things to do: it has to pay
losses and expenses. 1t charges q preni-
UNI calculated to cover the losses and ex-
penses. It knows from its mortality tables
what the losses will be, within safe mar
gin; it makes the expenses much or little
as it chooses within certain limits. 1t es-
Inmates a percentage which they ought not
to exteed, and adds that to the premiums
charged to cover death losses.
Out of these premiums the company pays
it's yearly death losses, its expenses, and
also furnishes the reserve to provide for the
greater mortality when its risks got older
and or the maturity of the endowments.
This reserve it can invest until it is need
ed; and it is therefore calculated on the as
kbo% ui11 aorp Gonna oarfain
rate of interest while held.
If now the death losses have been less
than the table called for, and the expenses
have been less than was provided for, 80
much of the premium will have been saved
and can be returned to the insurer. But
it is not q profit to him. It is simply a
saving from the anticipated cost of carry
ing his insurance. But his insurance is an
expense to him just as his fire insurance is.
The premium returned to him is a reduc-
ton of the expense, not profit.
If the rate Of interest earned is greater
than that assumed, the excess is in the ma
ture of profit. For example, if the COM
pany assumes that each mans reserve if
going to earn four per cent, and it does
earn five per cent, thsn it puts the -four
per cent. into the reserve, and the e1tra
one per cent. is surplus, and can be turned
back to him with the savings from losses
and expenses. This surplus interest il
usually called profit, and is in the nature
of profit, though its actual use is merely
to reduce the cost of carrying the insur.
ance. 1t is, however, the only profit there
is to the insurer. All else is cost of insur
ance-paying expenses and helping pay
other peoples losses until ones own time
comes when others will pay that loss.
How can this operation be converted in
to profitable Investment for the insurer
himself?
1t protects his family and is therefore
Indispensable; but how can he make none.
out of it?
Several of the great companies are offer
ing under different names the same Gin
vestment policy" "bond," &c. For illus
tration of the whole matter we will selec
| what is in fact twenty-year endowmen
policy, with no dividends until the end o
the twenty years.
THE ESTIMATED ADVANTAGE.
Take a'man aged 80, insuring for SO,
600; he is to pay 20 premiums Of $40
each. The policy contract is to pay hin
| SO, 600 if he lives and keeps up his polio
! through the twenty years. But the com
panies "estimate" that by leaving all hi
Il =