Of course, there may be other items of gain or loss besides those enumerated in the above illustration.
Most companies give policy-holders the option of either taking a cash return, or having the amount converted into a "reversionary dividend," payable with the policy; that is, simply to purchase insurance for a single premium. The above cash dividend of $6.72 would give a net reversionary dividend of $20.82 (the net single premium for $1.00 at age 39 being $0·32283); but of course some deduction must be made for expenses of management.
These reversionary additions form a very large item with old institutions, one leading company alone having over $25,000,000 in force.
Intimately connected with the reserves and dividends, and next in importance, is the question how lapsed or forfeited policies should be treated. Probably no theoretical point has been so hotly contested, and certainly none has offered equal difficulties in practice. In the early days of the institution, when it was prudent to err on the side of safety, the view prevailed that a policy was a contract for life, from which neither party could withdraw. Instead of a single premium in advance, annual account payments were accepted, but it was thought that a violation of this condition could only be regulated by absolute forfeiture of all previous contributions. As the business grew in importance, and long experience proved it grounded on reliable foundations, the harshness of this rule began to attract attention.
In England Dr. Farr advised the issuing of non-forfeitable policies, and the allowance of a definite cash surrender value on them. In this country the Insurance Commissioner of Massachusetts first brought the subject before the Legislature of that State, and a non-forfeiture law was passed in 1861. In opposition to the views held by actuaries of the old school, a tendency extreme in the other direction now began to assert itself. It was contended that the reserve pertaining to each policy should be considered equivalent to a deposit in a savings-bank, to be withdrawn at the pleasure of each individual insurer. This position was combated as wrong in theory, and as absolutely subversive of the business in practice. Insurance when applied to the individual becomes an absurdity, and it can only be safely conducted on averages dependent upon large aggregates. A person that insures for life virtually agrees to contribute to the death-claims of other members as long as he himself lives, and should he withdraw ought to pay his share of the liabilities assumed and the expenses of management attendant thereon. It becomes the duty of an insurance company to prevent the unnecessary withdrawal of its members, and self-preservation compels it to constantly strive to acquire new lives to retain the institution in a prosperous condition. Therefore, while it would be unjust to confiscate the whole accumulated reserve on lapsed policies.
