lives the rates of mortality would be less than by ordinary statistics; and this is confirmed by the published experience of many companies. Here we find a third source of profit.
In these three ways, and others incidental to the business, it happens that all corporations managed with ordinary prudence accumulate a much larger capital than is needed for future losses. The advocates of the stock plan contend that, by a low rate of premium, they furnish their assured with a full equivalent for that division of profits which is the special boast of other companies. In a corporation purely mutual, the whole surplus is periodically applied to the benefit of the assured, either by a dividend in cash, or by equitable additions to the amount assured without increase of premium, or by deducting from future premiums, while the amount assured remains the same. The advantages of the latter system must be evident to every one.
It is of course important in all companies, whether mutual or not, that the officers should be men of integrity, sagacity, and financial experience, as well as that due precautions should be taken in the care and investment of the company's fund; and it is now proved by experience in this country, that, when a company is thus managed, so regular are the rates of mortality, so efficient the safeguards derived from the selection of lives, the assumption of low rates of interest, and the loading of premiums, that no company, when once well established, has ever met with disaster. On the other hand, there has been a rapid accretion of funds, in some instances to the amount of many millions of dollars. The characteristics of a good company are security and assurance at cost. It should sell, not policies merely, but assurance; and it should not make a profit for the capitalist out of the widow and orphan.
The policies issued by life companies vary in their form and nature. The ordinary one is called the life policy, by which the company contracts to pay, on the death of the assured, the sum named in the policy, to the person in whose behalf the assurance is made.
In mutual (cash) companies, when the premium has been paid in full for about sixteen years, judging from past experience, the policy-holder may expect that his annual dividend on policy and additions will exceed the annual premium, thus obviating the necessity of further payments to the company, while his policy annually increases in amount for the remainder of life. But, on the contrary, when the dividends have been anticipated, as in the note system, by giving a note for part of the premium, the policy-holder insuring in this way, although he may at first receive a larger policy than he has the ability to pay for in cash, may lose the chief benefit of life insurance. For should he become unable, either by age, disease, or loss of property, to continue the payment of his premiums, his policy must lapse, because there is no accumulation of profits to his credit on which it can be continued.
In other forms of life policies, called "Non-forfeitable," premiums are made payable in "one," "five," or "ten" annual payments. In all cash companies, and in some of the note companies, after the specified number of premiums have been paid, the policy-holder draws an annual dividend in cash.
A further advantage arising from this plan is, that the policy-holder, at any time after two annual payments have been made, is always entitled to a "paid-up" policy for as many "fifths" or "tenths" of the sum assured as he shall have paid annual premiums. For example: a "five-annual-payment policy" for $10,000, on which three premiums had been paid, would entitle the holder to a "paid-up policy" for $6,000; a "ten-annual-payment policy" for $10,000, on which three payments had been made, would entitle the holder to $3,000; and so on for any number of payments and for any amount, in accordance with the face of the policy.
Another form is denominated the En-
