This section is from the "Everybody's Guide to Money Matters" book, by William Cotton. With a description of the various investments chiefly dealt in on the stock exchange, and the mode of dealing therein. Some account of the pitfalls prepared for the unwary, and suggestions to the cautious investor.
The proposer has now to undergo one other formality, disagreeable no doubt, but absolutely necessary, and that is the medical examination. This is done by the medical officer of the company who has to certify that the proposer is free from any defect likely to shorten his natural life, and that he is sound "in wind and limb." Deficiency in the number of the latter is, however, not considered unsoundness, as a person with one arm, or one leg, or one eye may be just as good a "life" and therefore equally eligible for insurance with him who is perfect. All the enquiries in the form are made by the Office and the expenses (including the doctor's fee) paid by the Company.
If the proposal is accepted, the proposer is informed of the fact and then pays his first premium in advance, it may be a year's, or half-ayear's, or a quarter year's, at his own option, and he then becomes (subject to the rules of the particular company) the insured.
A few days subsequently a life policy will be sent to the insured. This is a document setting forth, in full, the terms of the agreement between the Company and the insured, and must be carefully kept, in such wise that it may readily be discovered by the person for whose benefit it is ultimately intended. The writer once found amongst some old papers a life policy in the name of a man who had been dead for many years. On enquiry at the office it was found that the amount which was payable at his death had, by some neglect, never been claimed. The company of course at once paid the money, and a needy sister was very much benefited.
Thirty days' grace are usually allowed for subsequent payments of premium. It is customary for insurance offices to forward to each policy holder a reminder, from one to four weeks before the periodical payments for premium become due, but the absence of any such notice will not be accepted as an excuse for non-payment, and if the premium be not paid before the thirty days' grace allowed have expired, the policy becomes void. It may, however, be revived upon paying a fine and producing a medical certificate of health.
Should the proposal be declined the fact will be notified to the proposer, but he will not be informed of the reason. Proposals are rejected because of something wrong being discovered by the medical examiner, or because of intemperate habits, or that the history of his near relations in regard to health and longevity is unfavourable; anything in short that indicated that the proposer will not, in all probability, live as long as a healthy man is expected to live is enough reason for declining to insure his life.
Insurances may be effected for a limited period, say for one, three, or five years, at about one half the premium charged for the whole term of life. If the insured dies within the period, the amount of the policy is paid, but the insurance ends with the periods of time agreed upon. This class of insurance is useful in many ways. For example: A person with a certain income for life is desirous of borrowing £500, to be repaid by annual instalments. There would be no difficulty in finding a lender, provided he could be sure of repayment; and this could be secured in this manner -- the borrower would assign to the lender £100 a year of income for five years for the gradual discharge of the loan; the borrower's life would also be insured for five years and the Policy assigned to the lender. If the borrower lived for five years the loan would be paid out of the income. In the event of his death, it would be paid by means of the insurance money.
Another example: a child aged seventeen is entitled to a fortune, large or small, at the age of twenty-one, but meanwhile is wholly dependent on its mother who has only an annuity for her life. Should the mother die before the child becomes of age the latter would be left without the means of subsistence. In such a case the prudent mother would insure her own life for the four years which must elapse before the child could come into the fortune, for such a sum as would keep it from want, so that in case the mother died the insurance money would provide the means of living. The premium charged on this class of insurance is moderate; about £2 6s. for a person aged fifty; and the outlay by the mother could be subsequently repaid when the child was in a position to do so.
There are other special modes of insurance to prevent loss or damage in cases of remote risk; indeed almost any chance of loss through the possibility of something improbable occurring may be guarded against by insurance. For instance, a lady aged forty-five has been married for twenty years and has had no children. If she has a son her property will descend to him; if she dies childless it passes to a nephew. The chance of the lady having a son is extremely remote but still there is a possibility, and it is against loss by this possibility happening that the nephew takes out a policy of insurance for any reasonable amount, the premium charged being surprisingly small and payable in one sum down.