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utterly to protect the insured. If, however, the policy contains the conversion privilege, and if the time limit for making an exchange of the policy for a whole-life policy has not yet expired, the insured will certainly want to take advantage of this privilege and thus protect himself against the possibility of his insurance expiring before death occurs.

CHAPTER VI

ORDINARY LIFE INSURANCE

Ordinary whole-life policies provide for the payment of the face value only upon the death of the insured. Maturing only upon death, such policies are taken out primarily for the benefit of others, and, therefore, represent pure life-insurance protection which the insured has unselfishly provided for those dependent upon him. During the earlier years of the insured's life this type of insurance in the great majority of cases affords protection at moderate cost for wife and children or other dependents. In the later years of life when it may be felt that such protection is no longer necessary, because the children have become financially independent, the insurance affords a convenient means of leaving legacies and bequests. As explained in a previous chapter, the premiums on this form of insurance are paid annually, semi-annually, or quarterly, under the level premium plan for the whole of life, while the proceeds of the policy may at the option of the insured be paid either in one lump sum or on the installment plan.

Furnishes Permanent Protection. Several advantages may be noted as essentially associated with this plan of insurance. In the first place it gives the insured permanent protection at moderate cost, and this is highly important for the average man of moderate salary or daily wage who requires considerable family protection and whose limited income does not enable him both to pay premiums and to accumulate a savings-bank fund. Term insurance is essentially designed to afford protection against a temporary family or business hazard, and can be recommended safely only when it is definitely known that the hazard under consideration is

temporary in character. But such contracts, as we have noted, contain elements of danger which are inseparable from temporary insurance. The chief danger connected with such insurance is that the insured may have miscalculated the duration of the hazard confronting him and his future need for protection, or may neglect to carry out his original purpose to convert his temporary insurance into or replace it with policies which afford protection for the whole of life. Under ordinary life insurance all danger as to miscalculations relative to the uncertain future need of insurance or the failure to carry out original purposes is obviated. Such insurance is certain in its results in that it provides protection that is permanent, payable in the event of death, whether that occur early or late, and purchasable at a definite and moderate premium which remains uniform throughout life.

Furnishes Permanent Protection at the Smallest Initial Outlay. As has been aptly stated "the ordinary life policy is of all policies the one which gives the maximum of permanent protection at a minimum annual charge." This may be illustrated by comparing the gross premium charged by companies for ordinary life policies with those required under the limited payment and endowment plans. For instance, the annual premium charged by a certain company per $1,000 of ordinary life insurance is $19 at age 25, $21.80 at age 30, and $25.45 at age 35. On a twenty-payment life policy at the same ages the annual premiums charged by this company are $26.75, $29.70, and $33.28; while on an endowment policy, maturing in twenty years, the premiums are respectively. $44.82, $45.63, and $46.70. It is therefore seen that the ordinary life policy furnishes permanent protection at the smallest initial outlay, although, as will be shown later, the limitedpayment and endowment policies will, if the insured continues to live, ultimately yield certain advantages which probably induced the insured to prefer these forms and which will compensate for the higher premium. In case of early death, however, the insured would realize the same amount under each of the aforementioned policies, yet the outlay on the

part of the insured would have been considerably greater under the limited-payment and endowment plans than under the ordinary life policy.

Owing to its moderate annual cost, an ordinary life policy tends to bring adequate protection within the reach of nearly all. It is particularly well adapted to those whose income is small and who find desirable a considerable amount of permanent protection. To the rich man, on the other hand, the policy affords ample protection and enables him to use any surplus money to better advantage probably than if allowed to accumulate with an insurance company. The policy is also well adapted to persons who, although having passed middle life, may still desire the largest amount of permanent protection at the lowest cost. Even at ages 45 and 50 the annual premiums charged by the aforementioned company are, respectively, only $36.50 and $45.10; while for a twenty-payment life policy at the same ages the premiums are $43.46 and $51.26, and for an endowment policy, maturing in twenty years, $51.45 and $56.55.

Combines Saving with Insurance.— Besides its moderate cost and the permanent character of the protection offered, the ordinary life policy furnishes the further advantage of combining saving with insurance. In term insurance, as already explained, nearly all of the premium represents payment for the current protection, and the companies follow the practice of not refunding anything upon withdrawal. Moreover, under term insurance nothing is paid to the insured in case of survival at the expiration of the term, and it is this fact that constitutes one of the chief objections to this type of insurance, it being most difficult, as previously stated, to make the average holder of such a policy, after he has paid ten or twenty premiums, appreciate the fact that he has already received full value in the form of protection for the premiums paid, and that he is therefore not entitled to receive any refund.

As contrasted with this shortcoming, the ordinary life pol.. icy presents an entirely different situation. In the early

years of such a policy the annual level premium is much in excess of the amount required to pay the current cost of the insurance protection, the balance being retained by the company as a reserve (called the legal reserve) and improved at compound interest at an agreed rate for the purpose of making good the deficiency in the later years of life when the annual level premium is no longer sufficient to pay for the actual cost of the insurance. The overcharges in the early premiums are instrumental in inculcating thrift on the part of the insured and in the great majority of instances, repre

GUARANTEED VALUES

Age: 35. Amount: $10,000. Annual Premium: $270.
Plan: Ordinary Life.

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The values given above will be increased by any surplus or addi

tions standing to the credit of the Policy.

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