The Indianapolis journal., 1897-04-12
INSURED FOR 100000
GREAT RISK TAKEN ON LIFE OF LIE.
LAND sTANFORD's WIDOW.
Company That Wrote Policy VIII
Make Money IL Mrs. Stanford should
Live Six Years Yet.

NEW YORK. April 1.-THE issuing of q
Jane Stanford. of San Francisco, by one
New York company has caused much COM
ment among those unacquainted with the
business of life insurance companies. To
the unnitiated it appears that the company
is taking a tremendous risk in making a
policy for such an amount on the life OF a
woman who has passed the three score and
ten mark, yet IL is not such a risky venture
after ALL 1t is the largest life insurance
policy ever written by one company. 1t
should be remembered. however that this
company will undoubtedly reinsure the
risk. Mrs. Stanford is the widow of Lee
land Stanford, the railroad millionaire. She
is seventy-two years old, and, according to
the expectation of life" il will be seven
years and some months before she may be
expected to fall victim to the grim
reaper" 1t was with the intention Of pro-
viding funds for the Leland Stanford Uni
versity that Mrs. Stanford had her life in
sured. Under the terms of the policy the
company agrees TO pay 81 900. 600 to the uni
versity IL Mrs. Stanford dies within ten
years. If she lives for more than ten years
the company will pay 81 OOO. 900 on her death.
OF course the premium on such an amount
Of insurance is enormous. Mrs. Stanford
will have to pay the company $4,000 an
nually.
Now, as to the risk the company is
suming. Ii is not generally known outside
of insurance circles that companies who
issue policies for unusual amounts imme1i-
ately reinsure in two or three or perhaps
dozen other companies for maybe the en-
tire sum. Therefore, If Mrs. Stanford shossld
die month after having her life insured
for 81 ,000, 900 the loss TO the company issuing
Assuming. however, that the company did
not reinsure, but took the entire risk. what
would be the dia chances for Pre- Profit or losss
company Is governed by the American table
of life." The expectation OF life" is the
number of persons of any given age have
yet TO live; that is. the sum of the years
which all may be expected TO live divided
by the number of persons.
Take 100000 children. each ten years old
to-day, for instance. Sixty-two years from
now, when the survivors shall have reached
the age of Mrs. Stanford. there will be
only 80, 73O olive. according to the table. The
survivors ""expectation Of life' then will
Therefore. the expectation of nfe- OF
Mrs. Sanford, insured for sl.000.000 at an
annual premium of $4,000. is about seven
for only five years, reckoning interest at s
per cent. compound. the insurance company
would have its million-dollar policy covered
And the company may invest the money
at much better interest.
If Mrs. Stanford live seven years she Will
have paid into the company si,l90.0O0. II
the company invested $4,000 a year for
seven years at per cent compound inter-
est the total would amount TO more than
81, SOC, 900.
1t win be readily seen that the company
would make a handsome profit If Mrs.
Stanford lives more than ten years, even
though il paid the S2,0c0.0OJ. as stipulated
I'm the policy. Taking everything into con-
has probably reinsured the risk IL is very
much on the safe side, and the prospective
gain is worth the risk.
Mrs. Stanford has made many sacrifices
for the university. While its FUNDS were
tied up in the court for more than a year
she paid the running expenses out Of her
private funds.