Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1912-09-27

insurance companies are not taking any
great chances, for all their calcula.
tions and rates are based on ascertain.
ed facts, as revealed by millions oi
carefully collated cases, showing the
average number Of deaths per 1.00(
among various classes. Quoting the
rate for a policy is no blind, haphaz-
ard operation, but one having a sound
actuarial basis. For, while individual
life is ever an uncertain quantity, col
lective life Is subject to a mysterious
law Of average, which enables the
companies to transform into practi-
cal scientific certainty what would 9TH
erwise remain a perfect lottery.
These vital statistics are called NOR
tality tables, of which there are sever
al. Lives differ in quality as in length,
and there Is a great difference between
that Of the clergyman and the saloon
keeper. There is also big difference
in the quality and length Of the lives
of grocers and coal miners, servant
girls and wives Of wealthy men.
The calculation Of your life is sim
pie. Let us suppose you are 80 years
Of age. Deduct that from 80; then de-
duct a third from the result. That
makes your expectation Of life approx
mately SO years, although you should
live longer or die sooner. But this is
your average, the basis Of any life in
surance contract.
Insurance companies, dealing-with
colossal sums, must obviously make
their money work-yield the maximum
Of interest. And they command some of
the finest financial talent available
keen, experienced men, knowing all
the markets, always on the alert for a
financial bargain" Controlling vast
sums in liquid cash, constantly aug
mented by current receipts, they are
in the best position to deal at the clos
est prices and at the psychological mo-
ment of depression or panic. More
over, they are doubly strong, because
they can always select their own time,
both for buying and selling. What the
power of interest means may be gath
cred from two striking facts-one or
two companies can meet all their la
bilities out Of their interest fund alone;
a certain big company earns over $780,
900, 900 a year in interest alone.
During the last twenty-five years
the public have paid about $4,000, 0,000,-
900 in insurance premiums, while the
companies have paid their policy hold
ers about s2,5OO,oOo.oOo. Whence these
surplus millions? They have resulted
from the accumulative potentialities OF
compound interest
The colossal power Of that process is
humorously illustrated by statement
made by an insurance expert: Had
my ancestors in A. D. invested for me
two cents at five per cent compound
interest, I should have received in 1910
a little check for s75,762,s2s.113,125,-
OOO, 900, 900, 900, 900, ,O0O. .00O." Obviously
1 leave to him the responsibility OF
these figures, which have not check
ed. Although 1t may be exaggerated,
this example fairly demonstrates the
potentialities of compound interest
over long periods.
The essence of insurance is foresight
the adequate provision for contingen-
cies and even possible disaster. That Is
why the companies usually charge In
the premiums collected, an extra
amount to meet any unexpected call on
the funds, also for any slight miscal-
culation in their estimates. The in
terest earned may be less than antici-
pated; more people may die during the
year than the average indicated; ex-
penses may be higher. To meet these
possible circumstances, the policy Is
loaded" with an extra amount. More
frequently than not 1t Is found that
precautions were unnecessary, but this
merely means that the money Is avail
able for increasing the bonds, reducing
the premiums ,and for Strengthening
the reserve.
While the management expense OF
each company must obviously vary ac-
cording to the class and magnitude OF
the business transacted and also the
financial and administrative ability OF
the directors and officers, 1t remains
true that the sources Of profit are prac-
tically the same, the amount Of inter
est earned on the accumulated funds
available for investment, by the work
ing expenses being below what have
been estimated and provided for; by
the death rate being below the calcu.
lated per centage; by the lapsing and
surrender Of a certain proportion OF the
contracts.
AS regards the policies lapsing, this
occurs when the policy holders cir
cumstances compel them to cease pay
ing premiums, taking the actual sur
render value of the policy as security
Many people suppose that the compa-
nies' interest is to see polices lapse
They do, of course, make a profit ou,
OF the ldpSeS, Dul lAdt 10 hoS 0i"~1
very substantial, certainly not when
the lapse occurs within two or three
years of the issuance Of the policy
for the expense. of securing the busi-
ness, commission, ETC., does not leave
much margin.
When the premiums have been PAID
for a considerable time a policy need
not be allowed to lapse, for its holder
can claim a surrender value, which
varies from a third to half Of the tota'
premiums paid. OF course, the terms
offered by the various companies diff
fer materially, but where man has
paid, say, fifteen premiums of s75 each
he may depend upon receiving back
from the SLIPS paid in, from 1915 te
$3.50 in cash. Or he can accept a fully
paid up policy for a smaller amount
so that he will still secure a proper
tionate benefit without any further
payment of premiums. One OF the
most valuable features of insurance Is
that the companies are usually able
and willing to adapt their policies tc
the actual needs Of insurants and or
strictly equitable terms.-Chicago TIL
bune.