Year: 1872

of our oldest companies count assets ot
twenty to forty millions each. 1t should
be remembered, A0wever, that their liza.
bilities increase ibsnearly equal ratio
Many people make the great mistake OF
counting the huge assets of the larger CON-
panies as profits" of the business. They
might with equal justice call the deposits
in a savings bank profits" The more
policies in force, the greater is the sum
at risk; and certain prescribed proper
ton Of the whole amount must constantly
be kept on hand This is called the re-
insurance fund, or reserve


The theory in mutual company is,
that each insurant becomes member, and
each has an equal interest and vote in
controlling the management. But in ac-
tual practice, it is found that most of the
mutual companies, so-called, have a small
stock capital, and few stockholders con-
troll the appointments, and therefore the
management. And in purely mutual
company, the impracticability of getting
together the thousands of policyholders
widely scattered over the whole country,
leaves the management in board Of trus-
tees, whose control is even more absolute
than that of regularly appointed board
of directors, for they are not accountable
to small body of stockholders, vigilaut
to see that their rights are protected.


The mutual and the mixed companies
charge a rate of premium considerably
higher than the acknowledged cost Of in-
surance for the alleged purpose of guard
ing against any unforeseen danger in the
way of sweeping losses by epidemics. AT
the end H one,. two, three, or four years,
according to the varied practice of differ
ent companies. the unused portion or sur
plus premium is returned to the policy
holder as dividend" to be applied
either in reducing the amount of his an
nual premium or to increase the amount
of insurance In estimating the value Of
these dividends, the length of time for
which the company had the use of and the
interest upon this surplus premium, be-
fore returning it to the policy holder, is
an important element to be considered,


Formerly most of the companies collec-
ted fifty or sixty per cent. of the premium
in cash, and took note from the insured
for the remaining forty or fifty per cent,
secured by the policy itself, and bearing
interest A new note was given each
for the credit part of the premium. and
the interest was, collected annually on
payment of the premium. 1t was expec-
ted that these notes were, eventually, to
be wholly or in part Cancelled by the re-
turns of surplus premium. But in actual
experience it was often found impossible
to meet the expectations of policy holders
in this direction, and it has been found
best by majority of the older and larger
companies to require premiums to be paid
all in cash, while the old and vexatious
note system is fast going out of fashion.
| In the stock companies the simpler plan
is adopted of so much insurance for so
much money! A capital is paid in by
stock kholders to make good all deficiencies
and give additional security to policy-hold
ers. No dividends or returns of surplus
premium are promised by the company or
expected by the insured; but the rates Of
premium are fixed at as nearly the net
cost of insurance as the company thinks
the business can be safely transacted, and
they range from twenty to forty per cent.
lower than the rates of the mutual CON-
panies Under this plan the stockholders
can expect no return for the use OF their
money for term of years, the expense of
first gaining the business being larger on
the issue of new policies than on renewals
of old policies; aud the reserve for rein
surance fund accumulates more slowly.
Yet that is an affair of the stockholders,
and the insurant gets the benefit of a low
premium and difnite contract.


In our next article we will speak of the
extent of life insurance, attempted frauds
upon life companies, etc.