The Logan Republican. [volume] (Logan, Utah) 1902-1924, 1912-05-18
BY RICHA RID SIMS.

While the duration of life Of any
individual is of all events the most
uncertain, the number of deaths that
will occur among large aggregatiCns
Of individuals Of the same age can be
predicted with a marked degree OF
accuracy, and 1t is upon this founda
ton that legal reserve life insurance
has been established.
Through census reports, and thofs
general population statistics particu'
Iarly related to births and deaths,
tables have been developed whereby
it is possible to foretell with mar
vellous certainty the number OF peo-
pie that will die at the different ages
out Of any sufficiently large given
number Of lives; and with table OF
mortality that portrays with sufficient
accuracy death rates at the various
ages, not only is there developed a
true criterion by which to measure
longevity OF life in the aggregate, but
at the same time basis is obtained
by means of which the chances of
death at the different ages can be
used to determine the amount OF
money that will be needed to success
fully carry out policy Of insurance.
Inasmuch as an insurance policy is
q definite binding contract, agreeing
to pay out a certain fixed sum OF
money at some future time, and
equally inasmuch as an insurance
company Is in no sense a philanthropy.
ical or charitable institution, but in
the finest sense a scientifically ad.
ministered business organization, 1t Is
Obvious that to insure the carrying
out OF the obligations of the policy
contract the company must collect
enough money from those whose lives
il has insured to cover two general
items of expense, namely, to meet
the policy claims as deaths occur, and
70 meet the administrative cost Of do
ing business.
BY means of the NOR atty tables
above mentioned, two facts are de.
termined. one being that at any given
age the AVERAGE dni.uon Of life Is
n certain number OF yeats. the other
that OF a given number at certain
age, a certain number will die each
year. Thus assuming for the sake OF
the illustration a mans attained age
to be 80 years, We find that the aver
age length Of after life is $685. years
but that nearly 81 will die the first
year and an increasing number each
succeeding year. 1t is therefore clear
that the insured must provide money
enough TO meet three contingencies:
first to pay his proportionate share Of
the death claims of those that die
prematur,iy year by year, second to
create a fund that, added to each
earning compound interest at a GER
tain fixed rate, will accumulate TO the
face value of his policy by the time
Ills own theoretical death point has
been reached, and third TO contribute
such a portion of the operating en-
penses of the compshy as might c1r.t-
ably he CHARGED against his policy.
This first item is known as the
mortality element, the second as the
legal reserve, and the third as the
leading, and the three combined con.
stitute what is commonly spoken OF
as the premium.
1t can be readily seen that all pos
sible sources of expense are thus pro
vided for and that just as long as thu
tables upon which these vital factors
have been computed remain in force,
there can be no possible failure on
the part of any company operating
on this system to live up to al o!
it's policy obligations.
The legal reserve item aboce enum
Grated and explained, Is the factor
that differentiates this system Of In
surance from the assessment of fra
ternal plan, inasmuch rs all Other
plans OF insurance provide by means
OF monthly or quarterly assessments
for sum sufficient to take care o.
the current or premature deaths only
and make no provision for meeting
the death claims of that vast major
ity that live out their full expectanc!
period.
The term legal" is applied to thi'
reserve because OF the fact that sta
tute law requires that every company
operating on this system maintain a
ali times an amount sufficient to pro
vide for all OF it's outstanding oblisa