Something about life insurance may not be amiss, although it is impossible to allow much space for the discussion of the kind of insurance most desirable or what class of people ought to be insured, etc. The one point most necessary to be considered, however, is the company or companies in which to insure. Give this salient fact careful consideration, namely, do not be influenced too strongly by the rate of dividends earned by any one company and such like inducements brought to one's attention by the average insurance agent, but look into the plan which a company pursues in the investment of its funds, for upon their safe investment must the insured depend for the ultimate payment of his policy. Much has been publicly printed of late regarding the handling of investments on the part of large insurance companies with much truth, but these companies are solvent, and insurance in them is safer than ever before. It is always possible for any person contemplating insurance to obtain a list of the investments of companies under consideration, and, in lack of sufficient knowledge regarding them, to discuss the list with some competent financial advisor, who, at the same time, may be able to give desired information regarding the character of the men in control of the company.
"Life insurance" is nothing more nor less than depositing one's money in a savings bank, to which is attached the gambling feature of the company that the insured will live beyond a certain period, and the policy holder accepting the wager, and betting that he will not. If there were any way of ascertaining the absolute certainty of living beyond the estimate placed by the insurance companies, " straight life insurance" would be useless. For the privilege of betting that you will not live beyond a certain time, and upon the winning of which bet your estate collects the amount of the wager, you are asked to pay an excessive charge. The cost of life insurance, at this time of writing - 1906 - is far greater than it should be, and is necessitated particularly by the cost of soliciting life insurance through the medium of agents. If all agency work could be done away with the cost would be much lessened. Some persons consider that it is against public policy to solicit life insurance, but it is the result of undue competition in business. One of the old life insurance companies in England never has had an agent, and is to-day a prosperous company. It is very likely true, as the insurance people claim, that the rates of that company are no lower than obtainable elsewhere, because the new business secured is not great enough to give it the benefit of a large influx of new lives. That would change, nevertheless, if all companies did away with the agency feature. However, it would be somewhat of a radical revolution to expect such a change in the conduct of this business, and it is fair to say that the very large majority of life insurance companies in America are Sound, and that a policy taken in the same, even at the present excessive cost, is not only safe, but, for a great many people, very desirable. In this connection it may be stated that a recent law has been passed in New York State which compels companies doing business therein to limit their expense account. This will correct, to quite an extent, the excessive cost referred to.
It is not the object here to discourage life insurance; far from it. Rather to encourage it; but there are many instances when it is unadvisable, or at least unnecessary, and possibly a better investment of one's funds might be made.
While the cheapest kind of companies to insure in are the "assessment and fraternal insurance" companies, they have not proved the most satisfactory, as is set forth under the subject in quotations. The cheapest kind of insurance is "term insurance,' so called; that is, the insured receives the face of his policy only in case of death before the expiration of the agreed time; for, in this class, the only expenses which the companies need to figure into the premiums are those resulting from death losses and managerial expenses. But, as policies of this kind are usually taken out to cover some particular risk, they are not commonly of long duration. For the benefit of one's family, a "term insurance" policy with renewable features is an inexpensive and desirable form. The "level premium" plan is the best for a man upon a salary or with a certain yearly income, and in which there is little likelihood of any increase. It is more expensive than "term insurance" at the start, but not so later on.
"Endowment insurance" is well worth consideration for those who can afford the increased cost; as it not only carries the feature of the payment of its face value in case of death, but returns the same sum at the end of the endowment period. To that extent it is much like a savings bank. " Endowment insurance" encourages an enforced saving, and, when the policies have been properly selected, has proved very beneficial in many cases.
From the standpoint of an investment alone life insurance is absolutely valueless. Savings banks pay better rates of interest. There must be other reasons for insuring than the investment feature to make it worth the while. The interest earned may be a secondary consideration, but must never be a first.
Too great weight should not be attached to inducements frequently advanced by the agent, such as the amount of money which his company will loan upon a policy; its " cash surrender value," etc. The value of such privileges depends entirely upon the person, whether or no he is likely to abuse the same. Some men actually need the incentive which the lack of these privileges would compel in order to encourage the savings necessary to meet premium payments. Looking at it from the standpoint of one's family, an insurance policy which neither permits one to borrow nor obtain a "cash surrender value" upon it, is probably, in many' instances, the most desirable.