Omaha daily bee., 1905-11-01


OMAHA, Oct. S1.--To the Editor Of The
Bee Referring to your editorial in Mon
days Bee under the caption Cost of Life
Insurance" wherein by a process of
reasoning unknown to the writer you fall
In with certain other editors in announcing
the dctum that too much money IL
charged for life insurance, Certain self
appointed critics of the cost of life insur-
ance have arrived atoths conclusion by
taking the premium inSsme and dividing
it by the amount of insurance in force
and thus attempting to show cost Of life
insurance per $1,000.
They have utterly ignored the facts;
first, that a large percentage of such
policies are on the endowment plan, where
the face of the policy is payable at death
OF at the end of the endowment period
and where life Insurance is a side issue,
as it were, in the matter of cost; second,
a still larger per cent is on the limited
payment plan, 1. e., a plan wherein the
assured pays a certain premium for a
certain limited period. on completion of
which the policy remains in force without
further payment of premiums payable at
death; and, third a still larger per cent
on a plan where the premium remains
level. except as It may be reduced by divi-
dends, for the period OF natural life.
On none of these plans is life insurance
sold as cheaply year by year asst can be
obtained from any of our standard COM
panies But the selection has not been by
the companies but by the assured. II
Omaha contracted debt of 100000 and
issued bonds running twenty years at (
per cent interest per annum, 1t would be
a very simple calculation to determine the
amount to be raised by taxation to pay
the interest and to provide a sinking fund
for their retirement at maturity. II it was
provided that such sinking fund as It was
collected should be placed at interest. and
further, II the law provided that the rate
OF taxation for the assessment could not
be legally increased, and IL Furthermore,
| It was provided that failure to have the
face OF the bonds on hand in the sinking
/ fund on the completion of twenty years
| meant bankruptcy for the city, the cal
culation would be a little more intricate
and an assumption would have to be made
to determine the assessment and rate Of
| taxation.
! That assumption would be the rate Of
| interest that could be positively without
any reasonable doubt be earned by the
money in the sinking fund. Having made
| this assumption the problem is very sim
/ Pile Well there moves 10 town a man
/ who acquires property and who Is not
| familiar with the situation and he finds
/ first. heavy tax, and second. that the
1 city has quite a large sum in the sinking
/ fund and he Immediately begins 20 howl
about the taxes being too high. why.
| look at current expenditures Look at the
/ amount passed 10 sinking fund? Tn
doubtedly taxes are too high? There must
1 be reform. There must be a reduction in
! taxes"
! But is that so7 Is there a cent more
being collected than may be needed? Per-
hans there is. as you NAV be earning more
interest on your money than you assumed.
/ II such Is the case taxes can he reduced
| by the amount Of the excess. or the sink
ing fund will reach the amount required to
retire the bonds that much sooner when
taxes for this purpose will be wiped out
entirely.
/ How does this amply to the life Insurance
situation? will show you The life insur-
ance companies are required nv law to
name a rate under which they will guaran-
tee the face of the policy at death, and
having named the rate il cannot be in
creased, and the policy must he continued
as long as The policy-holder nays the pre-
MUM. II is the part of prudence. there
fore, 10 name a rate adequate under all
probable, " not possible, conditions that
will provide for the obligations aud thus
avoid bankruptcy. One thousand men al
are Is are insured today. BY means OF NOR
tality tables carefully compiled we know
pretty accurately the number OF men that
will die each year on the average. We
therefore can very accurately tell the
amount OF money that each must nav thai
each may receive 1CoO at death. This cost
as we must guarantee to the policy-holdel
that the rate will never increase. depends
on the rate Of interest we assume We WI