The times., 1897-04-12
MRS. STANF0RD'5 POLICY
Insurance Companies Not Afraid
of Million Dollar Risks.
BIG PROFIT ALMOST CERTAIN
The California Millionaire widow
Is Advanced in Years, But the
Company Insuring Her Life Not
Likely TO Lose Anything
tected by System of Reinsurance.

New York, April 1.-THE issuing OF
policy OF 81 100000 on the life Of aged
Mrs. Jane Stanford, of san Francisco, 10y
one New York company has caused much
comment among those unacQuainted with
the business OF life insurance companies
To the uninitiated it appears that the
company is taking a tremendous risk u
making a policy for such an amount on the
life of a woman who has passed the three
score and ten mark, yet it is not such "A
risky venture after all.
1t is the largest life insurance policy
ever written by one COMPANY 1t should
lie remembered, however, that this COM
pauy will undoubtedly Teinsure the risk.
Mrs. Jane stanford is the widow Of Le-
land stanford, the railroad millionaire.
She is seventy-two years old, and, ac-
cordiug TO the expectation OF hfe, 1T
win lie seven years and some months be-
fore she may be expected to fail "A victim
to the grim reaper"
Il was with the intention of providing
funds for the Leland Stanford UDiver-
sitv that Mrs Stanford had her life in
sured Under the terms Of the policy the
company agrees to pay 81 100000 to the
university If Mrs. Stanford dies within ten
years. If she lives for more than ten
years the compan will pay 50 100000 on
her death or course, the premiums on
such an amount of insurance is enormous.
Mrs. Stanford will have to pay to the
compauy S17O, 900 annually.
Now, as to the risk the company is as
srnling. 1t is not generally understood
outside of insurance circles that companies
who issue policies for unusual amounts
immediately reinsure in two or three or
perhaps a dozen other companies for
maybe the entire sum. Therefore. IL Mrs.
Stanford should die d month after having
her life insured for million dollars, the
loss to the company issuing the pohcy
would probably not be great.
Assuming, no wever. thatthe company did
not reinsure but took the entire risk, what
would be the chances for profit or ioss2
In issuing policies every life insurance
company is governed by the American ia
bic of mortality. which gives the EEK
Dectation of life" 'The expectation OF
life" is the average number Of years which
a large number of persons of any given age
have yet to live; that is, the sum OF the
wears which all may be expected to 1--we,
divided by the number of persons.
Take 100000 children, each ten wears
old today, for instance. Sixty-two years
from now. when the survivors VIII nave
reached the age of Mrs. Stanford, there
will he only 33.7 80 alive, according 70 the
table. The deaths each year viii average
2.4S7, and the death rate per thousand
will have been 1913 per cent. The sur
| vfvors. ..expeetation of life" then, viii
| be Z 755 per cent.
| Therefore the depreciation of life of
Mrs Stanford, insured for S1,0OO,000 at
| IN annual premium of $170, 900, is about
seven wears and a half II she paid the
nre,ninrns for only five years, reckoning
! interest at 6 per cent, compounded, th'
ins,,r,nea eorrplny would have its million
| dollar poIicv covered and have something
| like $4,000 to the good. And this com
| nanv NAV invest the money at much better
| interest. If Mrs. Stanford lives sever
| wears she will have paid into the company
| 81, 100000.
! If the company invested S170 900 veal
| for seven years at s per cent COMPOUND
| interest the total would amount to mor'
| than S., SOC, 900. 1t will readily be seer
| that the company would make hand
| some profit if Mrs stanford lived more
than the ten years, even though they pat
the So 900 900, as stipulated in the pohcy
| Taking everything into consideration
not forgetting that the company has PROB
| ably reiusured the risk-it is very muci
ON the safe side. and the prospective gaiT
| is worth the risk.
Mrs. Stanford has made many sacri
! fices for the university. While It's fund
were tied up in the courts FOR more ehai
year she paid the running expenses on
| OF her private funds.