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Bonuses
It has been mentioned in a previous page that
insurance has the advantage over the savings
bank, no matter how long a person may live,
and this is brought about by the operation of
Bonuses, so called. These are the whole pro-
fits in the case of a Mutual Company, and the
larger proportion of the profits in the case of
a Joint-Stock Company, which are distributed
amongst the policy holders. At the end of every
five years, in some cases seven, a valuation is
made of all the property of the Company and on
the other hand is ascertained what the company
is liable for, present and prospective. The
difference between the two constitutes the sur-
plus or profits, assuming of course that the assets
preponderate. This seems at first sight to be
a very simple process, but in reality the most
intricate calculations are necessary to arrive at
mathematical accuracy; but this needs no further
notice here. The bonus being declared, it may
be dealt with in various ways.
1. -- It may be added to the amount insured,
and so payable at death.
2. -- It may be commuted for an immediate
payment in cash. (In this case the amount
will, of course, be less than in No. 1.)
3. -- It may be applied in a permanent reduc-
tion of the future annual premiums, or a
proportionately larger reduction of these for
the next five or seven years, and in other
ways. Most offices granting every reason-
able facility for applying profits in any way
the insured may consider desirable.
Endowment Insurance. -- This is a class of
insurance by which an insurer may receive the
amount of a policy himself during his life, at
an age to be fixed at the time the insurance is
effected. Should he die before reaching the age
specified, the money is payable to his represen-
tatives.
It may also be so arranged that instead of
receiving the money at a certain age, he may be
paid a fixed sum annually for the rest of his life
thereafter.
For example -- a person at the age of thirty
may insure £1,000 to be paid to him on attain-
ing the age of sixty. The annual premiums for
insurances of this kind vary with different offices;
but they can be effected at the age named, at
about £28 10s. for the £1,000. If the person
died before attaining the specified age, the money
would be paid to his representatives; if he sur-
vived, he could either receive the £1,000, or be
granted an annuity for the remainder of his life
of £92 a year. In the case of females the
annuity would be £83 only, as they are supposed
to live longer than males.
Non-forfeitable Policies. -- This plan provides
for the continuance of insurance upon the life of
a policy holder should the insured from any cause
be unable to keep up his premiums. The prin-
ciple of this scheme ensures that, in considera-
tion of the premiums already paid, a policy for
a certain amount -- less of course than that named
in the original policy, which would be cancelled
-- would be granted freed from all future pay-
ments in respect of premiums, and the insurance
money of the new policy would be payable at
death. For example -- a person insures his life
for £1,000 at the age of thirty, the annual pre-
mium on which would be £25 a year. At the
age of forty he finds himself unable any longer
to pay the annual premium, but to avoid the
loss of the £250 which he has paid during the
ten years, he will surrender the old policy for
£1,000 and will be granted a new one, say for
half the amount, payable at death, and he will
not be called upon to pay any further premiums.
Settlement Policies. -- This class of policy is
issued under the Married Women's Property
Act (1882), whereby a trust can be created for
the benefit of a wife or children of an insured
person, the trustee being the Insurance Com-
pany. The advantage of this is that such a
policy does not constitute a part of the husband's
estate or become subject to his debts, either
whilst living or at his death, so that in the
latter event the money is paid to the widow or
children direct for their own use. A policy of
this kind, if necessity should arise, could also be
exchanged for a non-forfeitable policy in the
manner before pointed out.
Endowments for Children. -- A parent, by paying
a premium of about £5 5s. annually, can secure
to a child aged six a sum of £100, on its attain-
ing the age of twenty-one. Should the child die
before reaching that age, the money paid in pre-
miums is not lost, for it is all returned to the
parent without deduction.
By this means a marriage portion or outfit for
a girl, or a start in business for a boy can be
provided to any amount that may be desired.
Insurance on Joint Lives is another mode of
insurance, very useful in particular cases. For
example: a mother aged fifty has an income,
for her life and no longer, of £300 a year, and
she has a daughter aged twenty, who has no
means of her own, present or prospective, being
entirely dependent on her mother. The joint
lives are insured for, say, £2,000, which would
cost in premium £100 a year; the insurance
money to be paid at the death of the first of the
two. If the daughter died first the mother would
get back, by the insurance money, possibly
more than she had paid in premiums. If the
mother died first, say at the age of seventy, by
that time the daughter would have attained the
age of forty, and the £2,000 would be paid to
her. With the money she might, if she so
pleased, buy an annuity for life of £110 a year.
Insurance on the Longest of Two Lives, payable
on the death of the survivor, is useful in cases
where land or house property is held on lease,
so that there may be no pecuniary loss when the
lease expires. The rate of premium is in this
case naturally less than where the insurance is
to be paid on the earlier of the two deaths.
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