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THE POPULAR SCIENCE MONTHLY, 



THE PEACTICAL BUSINESS OF LIFE INSUEANCE. 



By THEODORE WEHLE. 



THE mortality tables, forming the theoretical basis of life insurance, 

 having been explained, it remains to be shown how they are em- 

 ployed in practice. There is a fundamental difference between life 

 and fire or marine insurance that must first be considered. The hazard 

 attaching to a building or a ship may remain unchanged for a very 

 long term of years, and the rate of premium once determined need not 

 be altered. Such property is usually insured for one year at a time, 

 and renewed as often as desirable. But the same methods can not be 

 applied to human life. If the policy were to terminate annually, and 

 a new examination could be demanded, many persons whose health 

 had become impaired would be declined at the beginning of every new 

 year. Then, as has been shown, from a very young age, upward, the 

 rate of mortality constantly increases. That would necessitate a higher 

 premium charge from year to year, so that, finally, a person w^ho should 

 be fortunate enough to reach the highest age of the table would have 

 to pay one hundred per cent, for that one year. It requires no argu- 

 ment to prove such a system impracticable, and therefore the plan of 

 fixing one uniform periodic premium for the whole term of the pro- 

 posed insurance has been adopted. 



The following table shows, in one column, the amount of net 

 premium that must be paid at the beginning of every year to insure 

 81,000 for that year ; and, in the other column, the equal net annual 

 premium to insure for life. 



By net premium is meant the amount calculated from a certain 

 mortality table, and rate of interest, without any addition for expenses. 



In all illustrations hereafter given the American Experience Table 

 and four and a half per cent, interest will be employed, that being the 

 official standard for the State of New York. 



From this table it appears that, to insure $1,000 for one year at a 

 time, it would cost $7.47 at age 20, and that the amount would have 

 to be continually increased, until at age 90 it would be $434.96, while 



