INSURANCE 



3005 



INSURANCE 



tain amounts in case of loss from specified 

 causes. In the simplest form of mutual com- 

 panies funds necessary to meet any loss are 

 raised by assessment after the loss has oc- 

 curred. In practice, however, the old mutual 

 companies require the insured to pay a regu- 

 lar annual premium, holding him further 

 responsible for his share of any additional 

 amount that may be required to pay losses. 

 This liability is usually limited to a fixed 

 amount or to a certain proportion of the cash 

 premium. Many small mutual companies, 

 writing premiums in a restricted territory, 

 have come into existence within recent years; 

 they represent often the cooperative enterprise 

 of farming communities. Such organizations 

 as the Modern Woodmen of America and other 

 fraternal groups issue policies according to the 

 mutual scheme. 



Fire Insurance. The working of averages, 

 which is of the utmost importance in insur- 

 ance, is well illustrated in the case of fire 

 insurance. Statistics are carefully collected by 

 all companies. They show how many build- 

 ings of a certain kind were destroyed by fire, 

 on the average, each year during a long period 

 of time. It is assumed that the future will be 

 like the past, and that the average number of 

 buildings in a given kind and in given sur- 

 roundings so destroyed will not vary greatly. 

 For example, the figures may show that one 

 pickle factory out of every thousand burns 

 down each year, on the average. Conse- 

 quently, it is assumed that the risk run by 

 any one pickle factory in any future year is 

 about one in one thousand. The rate is fixed 

 accordingly, being as nearly proportionate to 

 the risk as possible. The greater the risk, the 

 higher the premium charged. 



The applicant for insurance and the company 

 enter into a joint agreement, which is written 

 out in the form of a policy, or contract. The 

 great companies have now standardized their 

 policies, which are practically uniform. They 

 contain explicit statements as to the liability 

 of the company in case of loss and indicate 

 under what conditions the insurer's benefit will 

 be forfeited. The applicant, for example, is 

 required to inform the company of all circum- 

 stances known to him which may affect the 

 nature of the risk; he must give the location 

 of the property and the kind of business con- 

 ducted in it. If he is insuring a dwelling, he 

 will usually be obliged to say that he does not 

 intend to store in it any particularly inflam- 

 mable or explosive substance. His integrity 



and moral character are of interest to the com- 

 pany insuring him, since fires are often pur- 

 posely started in order to defraud insurance 

 companies. 



On this account, fire insurance policies are 

 not transferred when property is sold; though 

 in practice, companies usually allow such trans- 

 fers on obtaining the proper signatures. If wil- 

 ful misrepresentation or any attempt to de- 

 fraud the company can be shown, it will usually 

 be freed from its obligation to make good any 

 losses. When partial losses occur, the usual 

 practice is to reach a satisfactory adjustment, 

 but in case such an adjustment proves to be 

 impossible, the company often reserves the 

 right to pay for repairs. When the loss is 

 total, the owner recovers the full amount of his 

 policy, if his property reaches that value. 



Fire insurance covers all loss due either di- 

 rectly or indirectly to fire. Thus it includes 

 loss by lightning, if the lightning is accom- 

 panied by fire. It includes also the damage 

 caused by water used to extinguish the fire, 

 and the destruction of buildings blown up to 

 check a conflagration, as well as the injury done 

 to property in removing it from burning build- 

 ings. 



Accurate figures as to the exact number of 

 insurance companies and the total risks they 

 carry are not obtainable. It is estimated that 

 there are approximately 2,000 companies. The 

 risks carried in 1915 by the companies operat- 

 ing in New York state alone were in excess 

 of $50,000,000,000. The premiums received 

 amounted to $396,549,677 and the losses paid 

 to $224,639,583. The average rate of the premi- 

 ums in 1912 was about $8.90 for each $100. 



Marine insurance is, in its large features, 

 rather similar to fire insurance. One of the 

 notable differences is that marine policies, like 

 life policies, are readily assignable. 



Life Insurance. Two motives inspire men 

 to carry life insurance. Either they wish to 

 provide for their families after their death, or 

 they wish to make a safe investment at a 

 reasonable rate of interest. The form of the 

 life policy has been made extremely flexible 

 so as to accommodate a great variety of hu- 

 man needs. With all the variations it would 

 be quite impossible to deal in such an article 

 as this. Important general classifications are 

 life policies and endowment policies. 



Under the life policy, the insured agrees to 

 pay a fixed premium annually for life or dur- 

 ing a specified period or in a lump sum, in 

 return for which the company obligates itself 



