- A FABMEES' MUTUAL FIEE INSURANCE COMPANY. H 



be read and understood. The standard insurance policies of the va- 

 rious States, it must be admitted, are difficult reading for one not 

 accustomed to legal phraseology. The provisions contained therein 

 regarding manufacturing establishments and their operation are of 

 no interest to the members of a farmers' mutual. These considerations 

 appear to have induced the legislatures in a majorit}^ of the States 

 that have special legal provisions for farmers' mutual companies 

 to exempt such companies from the use of the standard fire insurance 

 policy of the State. 



A difference of opinion exists as to the term of years for which a 

 policy should be written. A small number of the farmers' mutuals 

 make their policies perpetual in form. The advantages claimed for 

 such a plan are that it tends to give permanency to the company, 

 and that it saves the expenses incident to the making of renewals. 

 However, as the value of a given farm risk changes from time to 

 time with the addition of new buildings, the deterioration of old ones, 

 increase or decrease in the amount of stock or machinery on hand, 

 such a policy, as a rule, will require changing at intervals, making 

 it in effect a new contract, even though technically the old policy 

 continues in force. There is also the danger that in the absence 

 of a specific termination of a policy, the revaluation of the prop- 

 erty will be unduly postponed, resulting in cases of overinsurance, 

 with the consequent tendency toward a bad moral hazard. The 

 duration of the limited-term policies issued by the farmers' mutuals 

 varies from a single year to 10 years. The usual length of term, 

 however, is five years, and more than seven-tenths of the farmers' 

 mutuals write their policies for this period of time. 



LIMITING THE SIZE OF INDIVIDUAL RISKS. 



It is very important, especially in the early history of a company, 

 when the total amount of its risks is relatively small, to limit care- 

 fully the amount of insurance written on a single building or on a 

 group of buildings subject to the same fire. Not to limit the size 

 of the risk is to invite disaster. The exact limit fixed upon such 

 single risks must be determined to some extent by the average value 

 of farm buildings in the community. It is perhaps safe to say, 

 however, that no recently organized company should attempt to 

 write more than $2,000 on a single risk. 



Some provision for sharing the liability involved in the larger 

 risks with one or more other companies should be made whenever 

 possible. Two ways of accomplishing this division are in vogue. 

 One of these is the plan usually referred to as joint or concurrent 

 insurance. Under this plan two or more companies issue separate 

 policies for specified amounts on the same risk, care being taken that 



