granted by the one-hundred and twenty-seven companies here studied.

Five companies promise the payment of one-half the face value of the policy in full settlement of the claim upon acceptance of proof of disability. The statement itself is sufficient to show the injustice of thus confiscating the greater part of a policy which will soon mature by death for its full face value. Furthermore the disability benefit will never be used in case the reserve on the policy is greater than one-half the sum insured, since the cash surrender value can be obtained under the regular non-forfeiture provisions. The extension of this benefit throughout the life of the policy without any limitation as to the age of the insured, as is done by three of the five companies, is likewise of no significance since the worth of the benefit ceases as soon as the reserve, based on the American Experience table of mortality, is above $500. The following table, showing reserves at specified ages computed upon the American Experience mortality basis with a 3 per cent interest rate, clearly demonstrates how an automatic age limit is thus fixed:

The operation of the reserves, therefore, upon policies issued at ages 20, 30, 40, 50 and 60 automatically sets the age limits, beyond which the disability benefit will be of no avail, at 62, 64, 67, 71 and 77 years respectively. This fact makes unnecessary the provision in one clause that the cash value of the policy may be taken if greater than one-half the sum insured. One company allows a cash

payment after disability equal to the full reserve on a paid-up policy. This reserve equals the net single premium which would purchase the policy computed on the American Experience Table rate of mortality and 3 per cent interest basis. This method would be correct in theory, were the rate of mortality among disabled lives used in computing the reserve instead of the rate among active lives; but as it stands it is not as liberal as the provision for payment of one-half the sum insured since in all cases under the ages 62, 64, 67, 71 and 77, in the policies here referred to, the reserve is below $500. Obviously above these ages the two contracts are on a par. When the reserve on a paid-up policy shall be granted, as computed on a rate of mortality among disabled lives, then, and only then, will the insured obtain a benefit of a financial value equivalent to the waiver of premium benefit so generally available.

Payment of an Annuity

Seven companies only have seen fit to pay disability benefits in the form of an annuity. In the analysis of this annuity two important considerations are presented: (1) the kind of payment, and (2) its amount. One clause guarantees that ten payments will be made regardless of the death of the annuitant previous to their completion, and the annuity will be continued after the ten-year period for only so long as he lives, a table in the policy stating the yearly amount. The other companies, with a single exception, provide for an ordinary life annuity payable during the life of the disabled person; the exception noted granting a five-year term annuity, i. e., payments limited to five in any case and to less than five in event of the prior death of the annuitant. Were there any possible justification for this clause it fails in face of the stipulation that recovery or the death of the insured before the completion of five payments will terminate the liability of the company. The five annual installments, were their payment guaranteed, have a cash value of only $467 and this is accepted in lieu of all other benefits under the policy. $467 is, therefore, the maximum amount recoverable under this annuity contract and there is great probability that the insured will die or recover before the five payments have been made and that the actual amount received will be much less. The following table is arranged to make easy a comparison of the amount of the annuity paid by each of these companies:

The annuity rates of the Equitable Life Assurance Society are included in this table to furnish a basis for comparison of the annuity granted after disability by these seven companies with the annuity given to a person not disabled. The significance of the comparison lies in the apparent fact that the mortality table on which the disability annuities were computed is the same as that used for computing rates upon annuitants who are not disabled. The statement has been repeatedly made that the rate of mortality among disabled persons is much greater than among active lives. Its truth is demonstrated by the following table taken from Mr. Mead's study of mortality among disabled lives, 28 showing the present value of a payment of $1 continued throughout the life of the individual, as computed according to different rates of mortality:

INVALIDITY Values at 31 PER CENT INTEREST

28 Transactions of the Actuarial Society of America, 12:83.

The annuity values, i.e., the present values of $1 paid annually during life, are very much smaller in the first five columns than in the last, which considers the rate of mortality among active lives; and for all ages until 80, at which time the rate of mortality among disabled risks is generally assumed to be the same as the American Experience rate. The cause for the great discrepancy between the American Experience rates and those in the first five columns is, of course, that disabled persons do not live as long as those not disabled and therefore not as many annual payments are made. The injustice, therefore, of computing invalidity annuity payments on American Experience rates of mortality or of granting annuity benefits that are no more liberal or scarcely more so than payments so computed is apparent. Not an exception exists to this serious charge against the annuity benefits granted under the disability clause.

CHAPTER VIII

BENEFITS (cont.)-EFFECT OF INDEBTEDNESS, DEATH OR RECOVERY ON THE POLICY

The presentation of the facts regarding the kind of benefits granted under the disability contract and the amount of value obtained in each case does not enable one to predict the final results that may obtain from the existence of this clause in a life insurance policy. There are four circumstances under which one or more of the benefits here described may be greatly modified. The existence of indebtedness on a policy which is payable in installments after disability may considerably affect the amount of these installments; the death of the insured before the completion of installment payments raises the question whether they will be continued and what settlement will be made in case they are not; the recovery of the insured from his supposedly permanent disability necessitates a similar decision with respect to the reinstatement of the policy and the premiums to be paid thereafter; and finally there remains the significant question, affecting the disability clause in participating contracts, whether the insured is to receive or to forfeit his dividends after disability has occurred.

Indebtedness Deducted from Face Value or from Commuted Value

When a policy is encumbered with liens at the time of disability of the insured it is important to know how this indebtedess will affect the amount of the installments to be received. The majority of clauses provide that it shall be deducted from the face value of the policy and one-twentieth or one-tenth, as the case may be, of this reduced amount be paid in each installment. By this method of treatment the liens against the policy are at once wiped out. In effect the policy becomes matured for its face value; and the company then deducts charges against it and begins payment of the remainder in installments. Five companies have followed a plan of reducing the amount of each installment in the proportion which the indebtedness bears to three-fourths of the sum insured. The effect of this scheme is to penalize the insured'for having borrowed