This is usually paid in money, or by a note at once, if the insurance be for a year or less.1 If for more than a year, it is usually payable annually; and it is common to permit the annual payment to be made quarterly, with interest from the day when the annual premium became due. (o) In any case, unpaid premiums, whether notes have been given or not, would be deducted from a loss.1
(o) In Buckbee v United States Insurance Co. 18 Barb. 541, a policy of life insurance contained a provision, that in case the quarterly premiums should not be paid on the days specified, the policy should be void; but that in such case it might be renewed, at any time, on the production of satisfactory evidence as to the health of the insured, and payment of back premiums, etc The premium due on the 10th December, 1851, was not paid until the 16th, when it was received by the insurers, without objection, and entered to the credit of the policy, and a receipt given for it. No evidence was produced in respect to the health of the insured, and none was required. The insured was, in fact, sick at the time, and died on the 19th January, 1852, of the disease under which he was then laboring. It appeared that it had not been the practice of the insurers to exact prompt payment of the premiums, when due; but they had allowed the same to lie over several days, and then accepted them, without objection. Held, that the conduct of the insurers had bean such as to amount to a waiver of a literal compliance with the condition as to punctual payment; and that the policy not having lapsed or become void, did not require renewal upon a disclosure of the state of the insured's health, within the meaning of that condition. Held, also, that such waiver restored the policy to the same condition in which it would have been had the premium been paid on the precise day when it fell due. In Ruse v. Mut. Ins. Co. 26 Barb. 556, the insurance was for life subject to be defeated by the non-payment of the annual premium. A prospectus of the company contained the clause,"Every precaution is taken to prevent a forfeiture of the policy. A party neglecting to settle his annual premium within thirty days after it is due, forfeits the interest in the policy." Held, that this was a waiver of the condition in the policy, and that, if the insured died before the thirty days had expired, the party in interest might pay the premium.
1 Any usual mode of payment is good, Currier v. Continental Ins. Co. 53 N. H. 538; as by a note, if accepted as payment, Mowry v. Home Ins. Co. 9 R. I. 846. When it is provided that a policy shall not take effect until the premium is paid, it will not take effect until that event, although all the terms are agreed on, and policy is written, provided it is not delivered, Schwartz v. Germania Ins. Co. 18 Minn. 448; and not even if delivered, unless such was the intention of the parties, Bodine v. Exchange Ins. Co. 51 N. Y. 117. A premium has been held to be paid when it is given to the insurers' expressman, Whitley v. Piedmont Ins. Co. 71 N. C. 480; and is then at the insurers' risk, Currier v. Continental Ins. Co. 53 N. H. 538. If a life policy provides that it shall not take effect until the advance premium shall have been paid during the insured's lifetime, the payment of such premium by a third person without the insured's knowledge before his death, is of no effect, though made with his money, and his administrator cannot ratify such an act Whiting v. Mass. Ins. Co. 129 Mass. 340. If the insurer, after the completion of the contract, refuses to accept the premium or deliver the policy, the insured may, after loss, without tender of the intermediate premiums, recover as if the policy had issued, less the premiums. Shaw v. Rep. Ins. Co. 69 N. Y. 286. See Howard v. Continental Ins. Co. 48 Cal. 229; Yost v. American Ins. Co. 39 Mich. 531; American Ins. Co. v. Klink, 65 Mo. 78; American Ins. Co. v. Henley, 60 Ind. 515.
There is a very great diversity among life insurance companies in respect to the payment of their premiums. On the one hand, they desire to make their premiums secure, because they constitute the fund on which rests the ability of the insurers to pay for their losses. On the other hand, they desire to increase their business, by making the payments of the premium as convenient and agreeable to the insured, as they can with safety. * These two purposes are obviously antagonistic; and in surance companies endeavor to reconcile them as best they can. And provision is often made by paying part of the premium in money and part in notes. (p) 2 The safest way for companies is of course to require payment of the whole in cash as soon as it is due. But this is also the harshest way of dealing with the insured. It is however certain that every qualification of this rule is, nearly to its extent as a qualification, a diminution of the security of the company. There may be one exception to this rule. It is, when permission is given, as it frequently is, to let an amount of premium remain as the debt of the insured, not exceeding one-third or perhaps one-half of the whole amount which the insured has previously paid in cash. For this debt is secured by the policy itself, and it would be deducted from any payment of a loss; and it may be supposed, where companies are tolerably well conducted, that any policy is worth to them as much as one-third or one-half of what they have actually received upon it.
(p) Insurance Co. v. Jarvis, 22 Conn. 133.
1 A contract of life insurance was simply suspended during the war of the Rebellion, and was revived by prompt payment of premiums with proper interest on the return of peace. Cohen v. New York Mutual Ins. Co. 50 N. Y. 610; Sands v. New York Life Ins. Co. 50 N. Y. 626. Hillyard v. Mutual Benefit Life Ins. Co. 6 Vroom, 415, was to the effect that the Rebellion did not determine the obligations of the defendant on a life policy, but merely suspended the payment of premiums by the assured, tender of which at the close of the war was sufficient. s. c. 8 Vroom, 444. In Worthington v. Charter Oak Life Ins. Co. 41 Conn. 872, a divided court held that a policy of life insurance, upon which no premiums were paid during the continuance of the Rebellion, but the whole amount of which and interest were tendered at the close of the war, remained in force only for the time covered by the last premium paid, and could not be revived by such tender at the close of the war. See Cohen v. New York Mutual Ins. Co. 50 N. Y. 610 ; Sands v. New York Life Ins. Co. 50 N. Y. 626; Martine v. International Ins. Co. 58 N. Y. 339.