Evening star. [volume] (Washington, D.C.) 1854-1972, 1925-01-10
BABSON ANALYzES
INSURANCE STATUS
Calls Outlook Bright and
Urges Taking of Policies
as Investment.
BY ROGER w. BABsON.


Special Dispatch to The Star.
WELLESLEY HILLS, Mass. Janu-
airy 10.-Three years ago / was Sc
men because advised certain
wealthy clients to cash in a portion
Of their life insurance. I pointed
out that good securities were then
very low and that II was good bust
ness for a man to have as much as
possible OF his money in bonds. 1
made II clear that no Insurance should
be Cancelled which in any way jeop-
ardized adequate protection for ones
family. I was referring to insurance
taken as an investment. Since that
time securities have risen sharply in
price while life insurance is obtain
able for the same figure.
AS the price OF stocks and bonds
climbs upward life insurance becomes
more attractive as an investment. OF
course ii has been only during recent
years that life insurance has been
sold as an investment. 1t started ike
fire insurance and other forms of in
surance. as a method of mutual pro-
lection. Men took out what they
needed In order to take care or their
families in case of death. 1t has
only been in recent years that insur-
tions, business houses and estates.
Protective Insurance Urged.
OF course, protective insurance
should be taken out by every one to a
certain amount, and should never be
Cancelled. cashed in. or switched. II,
however, a man gets enough insur-
ance to take care of his family any
additional insurance really becomes
an investment rather than insurance.
Some life insurance men may dis
agree with this distinction, but I am
sure every fair minded analyst would
make 1t. I mention this distinction
because, not being an insurance ex
pert, it is only in relation to such in
vestment insurance that have any
right to speak.
have always advised the purchase
OF insurance for protection, irrespec-
tive of what price securities are SELL
ing for and whatever the conditions
in the security market. A man who
needs protection should take out in
surance The only disagreement
have had with insurance agents is due
TO the fact that investment insurance
is less attractive when security
prices are low, and more attractive
when security prices are high. Be-
cause investment insurance is always
by what the same money will buy in
other forms Of investment. In a way
1t is the means between high and low
of the security market. This very
fact, that II is a means. is the reason
that the large insurance companies
are so strong and insurance so safe.
Attractive as Investment.
whether or not insurance agents
which
the better investment three years ago.
insurance or securities, am sure
they will agree with me now when
! say that insurance as an invest
ment is becoming more attractive
each day. That is to say, as security
prices go up, insurance, which re-
mains at a constant figure, becomes
more attractive as an investment
The truth is that when stocks and
bonds cross the average normal line
on the upward movement insurance
becomes an attractive investment
This especially applies to 2o-payment
life and various forms Of endowment
insurance which get fixed sum of
money on specified date.
l. believe that 1925 will be a good
bond year and that many issues Will
see higher prices than they have
already reached, but ] also believe
that investors should take account
of stock as to their insurance hold
ings. No man should have all his
investments in stocks, bonds, insur-
ance. real estate or any other one
thing.
liberalization Best Method.
All OF ones capital in Government
bonds is not sane method OF in
vesting. Diversihcation is the basis
Of
The point j wish to make today is
that in diversifying consider insur-
ance as a possible investment for a
portion OF your surplus funds during
1925.
In purchasing endowment insurance
use some sense as TO maturity. For
instance, in paying a $4,000 endow-
ment policy a man should consider
his age in determining the durs ton
of the policy. 1t is apt to be more
dangerous than beneficial to have a
$4,000 20-year policy mature
when he is 40. On the other hand,
1t is unreasonable for man of 90 to
take out a 20-year policy.
In taking out a $4,000 endowment
policy it is best to arrange the ma
turtles so that $4,000 will come due
when you are so, $1,000 when you are
81, $4,000 when you are So, and so
forth until you are 70. Then as you
can afford additional insurance have
II mature in a similar series of years
beginning when you are 70.
am very hopeful OF the insurance
business for the next few years.
believe all the large companies will
do a record business, and wide-awake,
honest agents should prosper with
their companies. 1 am very optimis-
tic on the stocks of most OF the larger
Insurance companies. The insurance
business has developed to stupendous
proportions, yet II is still in It's in
fancy when judged by its possibili-
ties. Moreover, under careful Gov
eminent supervision of the insurance
companies, and the fact that they are
officered and directed by capable, con-
scientious men. should make their Sc
curities as we'll as their policies sound
investments for portion of your
surplus funds.