Evening star. [volume] (Washington, D.C.) 1854-1972, 1891-01-15

called an investment, and that no man can
justify his judgment as an investor when he
pays life insurance expenses for the accumula-
ton OF his money, or for any other purpose
than providing his family the protection they
need and cannot get otherwise than through
life insurance. It Is q financial absurdity.
But the question still remains, how do these
companies which spend one-ffth Of their en-
tire income for expenses and can earn certainly
no more than per cent for the next twenty
| years, and 80 cannot safely promise 10 return
more than s10,s17-and really do contract to
return only SIC, 000-expect to make the q. 243
and u, 060 more than they dare contract to
pay?
THIS Is WHERE THE SPECULATION CONES IN.
And it is this: They know that some will die
during the twenty years; they expect that some,
possibly considerable number, will have to let
their policies lapse during that time. some Of
| them, perhaps, after making large payments.
So it is agreed that each policy holder viii leave
all his surplus earned on his policy year by year
with the company for twenty years; if he dies
| during the time 1t is to be forfeited to the
company; il he lapses, it is also forfeited; and
there is forfeited besides all Of his reserve I'M
less he applies for a paid-up policy within six
| months. in which case he forfeits about one
third of his reserve in addition to all his sur
plus. ri
This is the speculation; and, for the sake Of
it, the insured pays each year more than the
yearly cost of his insurance by the amount of
surplus earned or saved, and runs the risk of
losing 1t all If he dies or lapses; and he also
runs the risk of losing all, or a considerable
part OF the paid-up insurance which he would
otherwise get for his family in case Of lapse.
in the hope that he won't die or lapse. and will
share the forfeitures of those dying and lapsing.
and in the hope that these forfeitures will be SO
large that he will make money thereby
Evidently the scheme is totally opposed in
| spirit to true life insurance and could not be
understandingly engaged in by any man So
| llcitous for the thorough protection of his fam
lily or at all scrupulous about stripping other
! families of their protection or bv one Mt ali
careful to pay for his insurance only what it
costs or DESTROYS of knowing what it is costing
year by year.
But. granting a mans willingness to specu-
late with family protection for the sake of a re-
suit which, II realized, is only 1872 per cent an
| nual interest on his payments,
| WHAT ARE THE PROBABILITIES OF SUCCESS?
We can judge only by the past. Two of these
companies have been engaged almost ex-
clusively in this speculative life insurance for
twenty years already. For nearly all that time
they forfeited all the reserves of lapsing poll
cies AS well as all the surplus. But they are
settling now the surplus on policies which have
received. or are supposed to have received. the
1orfeltures OF the entire reserves and surplus
| from lapses for the last twenty years; and the
| surplus being now paid is only about so per
| cent OF the estimates of surplus on which
these policies were sold twenty years ago
| Either the forfeitures have been much less than
was estimated, or else the expense account has
| overcome the speculation; one or the other.
But these companies now profess to forfeit on
policies now being written only about one-third
OF the reserve instead of the whole of it as for
| merly. Yet they are estimating that the re-
suits OF these policies twenty years hence, which
can share in the forfeiture of only one third,
will be as great as are the present results Of
the policies, which are sharing in the forfeiture
| of the whole reserve for the last twenty years.
They estimate that part will produce as much
| as the whole. The old Full Tontine'' policies
in which all reserves we'll as all surplus on
lapses were forfeitcd-are yielding only so per
| cent or less of the estimated" surplus. And
| this so per cent result on Full Tontines is now
| used as an estimate" of the probable result of
| the Semi-TOntines-which are to forfeit all the
surplus, but only a third of the lapsed reserves.
For all these investment policies, ''bonds,"
| 'consOls," or whatever else they may DO called,
| are merely varieties of Tontine or Semi-Ton-
| tine.
| How Semi-Tontine is expected to accomplish
as much as Full Tontine has never been ex-
planned. The expenses are increasing; the for
FIXTURES can hardly be expected to be greater.
and much less proportion OF them goes to the
pool, and certainly the rate OF interest is not
likely to increase in the next twenty years.
The true question would seem to be this: II
the old FIJI Tontine estimates based on full for
FIXTURES have received only one-half the ex-
| pected surplus, why is not an equal shrinkage
| to be expected in the results of present 'esti-
mates" or illustrations which are themselves
! the disappointing results of the old Full Ton
tines, and which must be realized, il at all from
| only partial instead of full forfeitures?
How can partial forfeitures produce as large
a surplus as full forfeitures?
And it is forfeitures alone that can make
| these policies an investment to those who don't
happen to forfeit, for the expense account
kills the interest account.
Or apply the test Of history to this very
policy:
The old Full Tontine estimate was that the
entire cash value ut the end Of twenty years
would be S23, 500 surplus over the face of
the policy Of sl3, 500. But the actual surplus
settlement in sight is-if no further shrinkage
takes place such us has been constantly going
on 81, 900 instead of the Sl35O promised to
the hope. And now the - .06O result of a SlS 500
Full TOntine estimate is used as Semi Tontine
estimate for twenty years hence. II it has as
good luck as its predecessor, it will settle at
about 3,670 instead of 81 ,060, making total
settlement of the policy Sl3,670 instead of
1000; this is less than 81 per cent on the
premiums paid in, and to attain even this the
companies must depend on forfeitures equal to
21z per cent compound interest on the premiums
paid.
Is that speculation worth hazarding all. or
any part, of what one pays for insurance and
| making his family hazard losing it all!
JACOB L. GREENE, President
HARTFORD, Jan. IL, 1891.
The CONNECTICUT MUTUAL LIFE ks. Co.