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THE POPULAR SCIENCE MONTHLY. 



last chapter, showing his liberahty of view. 

 It is to be hoped that the publishers will 

 find it for their interest to modify the price 

 of this work, so as to briug it within reach 

 of a large circle of those who, in our opinion, 

 would be glad to have it. 



Politics and Mysteries of Life Insur- 

 ance, By Elizdr Wright. Boston : 

 Lee & Shepard. 238 pp., 12mo. Price, 

 $1.50. 



The object of this work is to call pub- 

 lic attention to certain practices in the ex- 

 isting system of life insurance, entailing 

 loss and injury upon the policy-holder. 

 Chief among these practices is the treat- 

 ment of holders who allow their policies to 

 lapse by non-payment of the premium, or 

 surrender them from a desire to change the 

 investment. In either case it is usual for 

 the company to issue a " paid-up policy," 

 that is, a guarantee to pay a fraction of the 

 original poUcy at the expiration of its term, 

 or to pay the resigning policy-holder a small 

 sum of money as the " surrender value " of 

 the policy. Mr. Wright assumes, and it 

 must be confessed with great show of rea- 

 son, that the "surrender value," in all cases 

 where the policy has existed beyond three 

 years, and in some cases beyond one year, 

 is far less than the amount the policy-hold- 

 er is justly entitled to receive. According 

 to his idea, legitimate life insurance is a 

 compound of insurance proper with the 

 savings-bank business, and his system is 

 therefore termed Savings-Bank Life Insur- 

 ance. From this point of view all premiums 

 paid are resolvable into two parts. One 

 part pays the cost of insurance, that is, the 

 expenses of the company : the other is 

 merely a deposit, in trust with the com- 

 pany, for gradual accumulation to equal the 

 sum of the policy by the time that that shall 

 become due. Either part may be larger or 

 smaller, according to the nature of the pol- 

 icy. With "ordinary life " policies, the 

 premiums are small, and distributed over a 

 great number of years ; there is, therefore, 

 great risk that the company will have to 

 pay the policy before the accumulated de- 

 posits can yield a sum to equal it. To com- 

 pensate it for this great risk, the company is 

 justified in taking for itself the largest part 

 of the premium. But, in the case of an en- 



dowment policy of short term, the premium 

 being large and confined within a few years, 

 the deposit accumulates very rapidly, and 

 will soon equal the policy. There being, 

 therefore, much less risk than in the former 

 case, the company can be justified in taking 

 only a small part of the premium for its 

 own use. Thus it is plain that the com- 

 pany's share of the premium is largest in 

 the case of an ordinary life policy, and 

 smallest in that of a short-term endowment 

 policy. It is called the " insurance value," 

 and is appropriated to the payment of the 

 expenses of the company. The policy- 

 holder's share of the premium is smallest 

 with the first kind of policy and largest 

 with the last; it is called the " reserve," and 

 should never be touched for any other pur- 

 pose than the payment of the policy to 

 which it belongs. Mr. Wright contends 

 that the policy-holder should be at liberty 

 to return his pohcy at any time, and with- 

 draw the " reserve " unimpaired, save in a 

 small sum to compensate the company for 

 the loss of a good risk. In some cases the 

 policy-holder is entitled to recover more 

 than the " reserve " when he surrenders his 

 policy. This occurs with " single-premium 

 policies" — policies on which many future 

 small premiums are anticipated, or com- 

 muted by the payment of a single large 

 premium. This single large premium, like 

 the small annual premiums considered above, 

 resolves into two parts, the " insurance 

 value " and the " reserve." The " reserve " 

 is the same in nature as with the annual 

 premium, though of course much larger; 

 but a new element enters into the composi- 

 tion of the " insurance value." The " in- 

 surance value " of an annual premium com- 

 pensates the company for its risk in one 

 year, while the "insurance value" of a 

 " single premium " compensates the com- 

 pany for its risk during all the years that 

 the policy has to run. Now, if the holder 

 of a " single-premium policy," having twen- 

 ty or more years to run, becomes desirous 

 to surrender his policy at the end of five 

 years, he should get back from the com- 

 pany, not only the " reserve," but also that 

 portion of the " insurance value " that has 

 been set apart by the company to compen- 

 sate for the risk attached to the remaining 

 fifteen or more years of the pohcy's term. 



