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Legal Reserve Life Insurance
Operating in the United States
Copyright, 1922, by
PREFACE The purpose of this publication is to supply accurate information as to the clauses, embodied in life insurance policies, or made a part thereof through supplemental agreements, on the so-called Total and Permanent Disability and Double or Triple Indemnity benefits.
While the designation of these clauses is not uniform, the principal clauses are so complete the contract entered into by the several companies is clearly shown.
The illustrations of the extra annual premiums charged (stated separately) are especially informative.
Companies writing solely “industrial” life insurance or life insurance in connection with "sick" or "funeral” benefits are omitted.
Because of the emphasis given to these clauses by soliciting agents, it is highly important, if these liberalizations of policy contracts are to endure, that extravagant statements or misrepresentations should not be permitted.
We desire to express our appreciation of the courtesies extended by the companies which have enabled us to give to our subscribers the information shown in the following pages. New York, November 25, 1922. A. M. B.
GENERAL INFORMATION CONCERNING THE TOTAL AND PERMANENT
The Total and Permanent Disability clause in a life insurance contract should not be regarded as health insurance, either by the Agent when soliciting an application, or by the applicant. It is primarily insurance of insurance, Its origin, (the first American policy containing such a provision
issued in 1896) briefly and roughly stated, was this:
The benefits of life insurance, it was observed, were lost to the wife and children in a very large number of cases when the husband became incapacitated, by illness or accident, and there was a permanent loss of his earning power. Frequently the cash or loan value of the life insurance policy was the only resource available to the family, and they turned to it. If the cash value was taken, the family protection went. If the loan value was taken, the family was unable to pay the interest, let alone the recurrent premiums on the policy, and the protection was lost. As a relief measure there came, first, the waiver of premium. This was good as far as it went, but it went only a little way. It relieved the family of premium payments, but did not supply an income to stand between the needs of the family and the money available under the policy.
The next step, provided an income, in addition to waiving the premium.
This income was usually in the form of an annuity. The face of the policy was split into twenty equal annual parts, and so long as the disabled husband lived he received each year one-twentieth of the face of the policy. If he lived twenty
eaten up, and at his death there was nothing left for the family. If he died during the twenty years, the total amount of the annuity payments that had been made was deducted from the face of the policy and the remainder paid to the family. This provision was a step in advance, but did not fully meet the situation.
The next step was to provide an annuity while leaving the face of the policy intact, so that at the death of the insured the full amount of the policy might be available to the wife and children. The amount of the annuity was, commonly, 10% of the face of the policy--on a $5,000 policy, the yearly payment to the insured would be $500. Annual dividends continued, and the cash value still grew to year. This was a distinct advance, but the condition governing the allowance of the annuity had one bad flaw. It was customary to require that claim could not be made until the disability had continued for at least sixty days, and sometimes longer. Then, if the claim were admitted, there was a further probationary period, usually of six months, sometimes of a year, and occasionally longer. A family, under the stress of the expense of disability and the loss of income, could very easily go to pieces before the first payment was available. This indicated the need of improving the provision still further. And so the next step was to provide that the disability annuity should be paid monthly.
The monthly disability payment, which began two or three years ago, has now become general, one company after another having adopted it within that time. Further, the probationary period has by most of the companies been reduced. Some of them go so far as to permit the filing of a claim immediately on the occurrence of disability. If the claim is accepted, the