The evening world., 1905-07-01
LIFE INSURANCES REAL COST.

LIFE REAL COST.
Every life insurance company has carefully kept Hrecords-the tables
compiled from its experience, which are called the American experience
tables-and the results compiled from the combined experience OF the
American and English companies are known as the combined experience
tables. From these tables can be nathematcaly deduced tire actual cost
of life insurance, dizegarding the expense of administration, the specr
lahon of officials and all other factors except the payments required to
meet the liability to the insured.
While these tables are compiled year by year a summary by five
year periods will give an adequate comprehension of the cost price.
This experience shows that at the age of twenty the expectation of life
is fotytwo years, and the number Of deaths in each thousand is 7S.
The cost of insurance per thousand dollars is Si267, of which a little
less than half should go to the reserve and a little more than half Should
20 to the payments of the insurance to those who die in the first year.
At the age of twenty-five the death rate is hardly varied, but the ex-
pedaton is reduced to thirtynine and onchalf years and the rate for
insunng at that age has increased to St421.
At thirty the death rate per thousand is s43, the expectation 1888
and the cost of insurance S1621.
At t~hirty-fve the corresponding figures are S.o5, 3L7S and 1884;
at forty 979, 2s1s and s22.35; at forty-fve 11.i6, 2454, s2712; at
fifty 1873, 2O91, $500; at ffty-fve 1857, i74o, S427o; at sixty
2ooe, t41o, s5545; at sxtyive 4o13, 1t.io, s7325; at seventy 6199,
S4S, sos.3e.
The reserve values are the difference between the cost as stated
above and the payments required to meet the current deaths. 1t should
be noted that the premium should not be increased from year to year to
the insured, but continue to the remainder of his life at the annual sum
which is computed for the age at which he insures.
These figures are valuable both to the holders of straight life and
endowment and other policies in the great life insurance companies and
the many millions who are insured in assessment and benevolent asso-
Citations. No insurance company of any nature can continue in busi
ness If it charges less than these actuarial figures. If it begins by insuring
oWy young Hen NS Gay or trouble VIII be postponed until its insured
grow old, but its liabilities cannot be met if it takes in less money than is
sufficient to meet the current death payments and to accumulate a re-
serve which at compound interest would equal the face of every policy
at the times of death computed from the experience mortality table.
On the other hand, no life insurance should cost more than these
figures plus a reasonable per cent. for expenses. There is no logical
reason why this expense should be greater than the cost of conducting
a savings bank plus the cost of medical examinations and why the excess
IN investment returns should not pay all the expenses of a life insurance
company just as the excess over interest paid depostors more than pays
all the expenses of a savings bank and in addition provides a surplus.
The lapses of policies alone should pay all The expenses of a life insurance
company which conducts its business on savings bank principles.
Furthermore this table would allow a comparison with returns from
endowment and incurred dividend policies. If the true cost of life insur-
a1ce IS deducted from the premiums paid on an endowment policy the
anerence is the cost of the endowment. If instead of buying an endow-
nent policy a straight life insurance policy was taken out for the same
amount, and the difference in payments was deposited in a bank and
compounded at 51-2 or 4 per cent, the ~polcyhoder would be much
better off.
One dollar per annum annually paid for twenty years into a savings
bank will amount with compound interest to S3O.97. That is. the saw
ings bank would pay the depoStor so per cent. more than the total of
his deposits. If he should die at any time his heirs would receive from
the life insurance company the full amount of his insurance and would
also receive from the bank the full amount of his deposits with compound
interest.
If he had an endowment policy and died he would receive only the
life insurance ard would lose the savings and interest. If he lived be-
You'd the time of the endowment he would receive at his option either the
endowment or life insurance, The insurance company would not give
him both, although he had paid for both. This is the little Joker in the
life insurance SYSTEMS scheme.
Every ~pocy-hoder should get a copy of the experience tables the
actuarial rate table and a compound interest table. First of all he should
carefully read his policy, particularly the small type. Life insurance is the
most important investment many men make, and they should carefully
study its mathematics, always remembering not 10 comminge their sav-
ingS with their life insurance. The best place for savings is a savings bank