PRACTICAL BUSINESS OF LIFE INSURANCE. 739 



Of course, there may be other items of gain or loss besides those 

 enumerated in the above ilkistration. 



Most companies give policy-holders the option of either taking a 

 cash return, or having the amount converted into a -' reversionary divi- 

 dend," payable with the policy ; that is, simply to purcliase insurance 

 for a single premium. The above cash dividend of $6.72 would give 

 a net reversionary dividend of $-20.82 (the net single premium for 

 $1.00 at age 39 being $0-32283) ; but of course some deduction must 

 be made for expenses of management. 



These reversionary additions form a very large item with old 

 institutions, one leading company alone having over $25,000,000 in 

 force. 



Intimately connected with the reserves and dividends, and next 

 in importance, is the question how lapsed or forfeited policies should 

 be treated. Probably no theoretical point has been so hotly contested, 

 and certainly none has offered equal difficulties in practice. In the 

 early days of the institution, when it was prudent to err on the side 

 of safety, the view prevailed that a policy was a contract for life, 

 from v\-hiQh neither party could withdraw. Instead of a single pre- 

 mium in advance, annual account payments were accepted, but it 

 was thought that a violation of this condition could only be regu- 

 lated by absolute forfeiture of all j^revious contributions. As the 

 business grew in importance, and long experience proved it grounded 

 on reliable foundations, the harshness of this rule began to attract 

 attention. 



In England Dr. Farr advised the issuing of non-forfeitable j^olicies, 

 and the allowance of a definite cash surrender value on them. In this 

 country the Insurance Commissioner of Massachusetts first brought 

 the subject before the Legislature of that State, and a non-forfeiture 

 law was passed in 1861. In opposition to the views held by actuaries 

 of the old school, a tendency extreme in the other direction now began 

 to assert itself. It was contended that the reserve pertaining to each 

 policy should be considered equivalent to a deposit in a savings-bank, 

 to be withdrawn at the pleasure of each individual insurer. This posi- 

 tion was combated as wrong in theory, and as absolutely subversive 

 of the business in practice. Insurance when applied to the individual 

 becomes an absurdity, and it can only be safely conducted on averages 

 dependent upon large aggregates. A person that insures for life virtu- 

 ally agrees to contribute to the death-claims of other members as 

 long as he himself lives, and should he withdraw ought to pay his 

 share of the liabilities assumed and the expenses of management 

 attendant thereon. It becomes the duty of an insurance company to 

 prevent the unnecessary withdrawal of its members, and self-preserva- 

 tion compels it to constantly strive to acquire new lives to retain the 

 institution in a prosperous condition. Therefore, while it would be 

 unjust to confiscate the whole accumulated reserve on lapsed policies. 



