ON THE NATURE OF INSURANCE. 239 



the first approximation towards an insurance office such 

 as those which at present exist. 



As yet we have not mentioned the interest of money. 

 Suppose the equalization office to pay no interest ; and 

 suppose all the lives to be 20 years of age,, such as are 

 described in the Carlisle tables, the average duration of 

 which is 41^ years. If, then, every person pay 11. per 

 annum, each will ultimately receive 41-J^? which is the 

 mere compensation of the inequality of life. Such per- 

 sons would enter into a mutual covenant, by which 

 those who live beyond the average term would divide 

 the surplus of their savings among those who fall short 

 of it. 



Probably, if the following question were put to all 

 those whose lives are now insured, What is the advantage 

 which you derive from investing your surplus income 

 in an insurance office ? more than half would reply, 

 The certainty of my executors receiving a sum at my 

 death, were that to take place to-morrow. This is but 

 half an answer ; for not only does the office undertake 

 the equalization of life,, as above described, but also the 

 return of the sums invested, with compound interest. 



No one can form an accurate idea of such an esta- 

 blishment, who does not consider it as a savings bank^ 

 yielding interest, and interest upon interest. This is 

 the reason why an office which charges for its insurance 

 more than it is worth, as an insurance, may nevertheless 

 put its contributors in a better position than they could 

 have held if there had been no such institution. To 

 make this clear, let us consider the working of a simple 

 investment office. A large number of individuals sub- 

 scribe a sum, which they intrust to an individual or a 

 company to employ, yielding them the return at some 

 fixed, but distant, period. Let each share be 1001. 

 The best thing which an individual could do with such 

 a small sum, so as to have perfect security for its return, 

 would be to invest it in the funds, at 3 per cent. He 

 might also invest the interest, and thus obtain com. 

 pound interest : but it is not easy for an individual to 



