Life Insurance Makes Saving Possible

One constantly meets with those whose argument against life insurance is that they prefer to save. The habit of saving should by all means he encouraged but it should be borne in mind that the saving of a competence involves the necessary time to save, and that life insurance is the only certain method to use as a hedge against the possibility of the saving period being cut short. A policy of saving can yield only a small amount at the start, while a policy of insurance from its beginning guarantees the full face value and thus safeguards the policyholder against failure through early death to have sufficient time to save adequately through other channels. Thus, if one is able to save $500 annually it will take nearly fifteen years to accumulate a fund of $10,000, assuming that the accumulations are safely invested annually at 4 percent, compound interest. Yet the resolution of the head of the family to protect the home with such a savings fund is contingent upon his surviving the full period, and may be defeated by death before the savings have reached any appreciable sum. To depend entirely oh saving as a means of providing for the future of the family is, to say the least, a highly uncertain policy to pursue. The first requisite in providing for the future support of dependents is absolute certainty, and this can be secured only by using life insurance as a hedge against the possible failure to continue the annual accumulations to the savings fund because of early death. Through life insurance the suggested fund of $10,000 can be assured in any case. Upon death the insurance company pays the face of the policy, while in case of survival the insured is given the necessary time to accumulate a competence.

Moreover, the roseate views which so many hold concerning their resolution and ability to accumulate and keep should be tempered by a frank statement of the distressing facts as they actually exist. Eighty-five percent, of this country's adults leave no estate at all, and about one-third of the widows in the country lack the necessities, and 90 percent, the comforts, of life. The habit of saving, as already stated, should be encouraged, but the foregoing facts clearly indicate that it is unwise to practice saving to the exclusion of life insurance. Both should be practiced, and, if only one is possible because of limited means, insurance should be selected because of its much greater certainty in leaving a stipulated fund for the support of the family whenever the breadwinner's income-producing capacity is cut short by death. Furnishes a Profitable and Safe Investment.In addition to guaranteeing an estate at once, life insurance contains an investment feature which is absolutely safe and which reaches large proportions in the later years of the policy. With the exception of a few types of policies only, life insurance represents an accumulation of savings admirably adapted to put small sums of money to prompt and profitable use, and in this respect has been aptly defined as "compound interest in harness". As will be explained later, nearly all types of life insurance policies gradually accumulate a so-called surrender value which may be withdrawn by the insured if he decides to discontinue the policy. This value, as will be shown later, represents an accumulation of a portion of the premiums paid by the policyholder which the company promptly invests at an assumed rate of interest; and in mutual companies the interest earnings in excess of this assumed rate are returned to the policyholder. In other words this value of the policy represents savings left with the company. Past experience shows that on the average life-insurance companies have earned on the savings left with them by policyholders the largest interest returns consistent with safety. Owing to the mathematical and scientific character of life insurance and the stringency of government supervision of the companies, there has not been a failure of a large and well-established life-insurance company in the last quarter of a century, and this is true despite the fact that we have witnessed three severe financial panics during the last twenty-five years. Nearly every company devotes the greatest care to its investments, which are spread out over such a large number of securities and other forms of property that a loss on one investment will be fully counterbalanced by profits on another. The investments of nearly every large company are in the special care of investment managers, and the skill with which they are made may be illustrated by the experience of one of the largest companies in America, which, valuing its securities at the lowest quotations prevailing in the severe panic of 1893, could still show an excess of $20,000,000 over and above the purchase price of those same securities. Moreover, an examination of the present earnings of life-insurance companies, shows that the great majority make between 4 percent and 5 percent, on their total assets, while in some instances the returns exceed this amount.

Not only does life insurance thus furnish a profitable and safe investment, but modern policies also make it possible for the insured to arrange for the safeguarding of the proceeds of the policy upon his death for the benefit of his beneficiaries. Too frequently the competence which a husband or father has provided through saving or insurance is quickly lost by the heir or beneficiary through speculation, unwise investments, or excessive expenditures for unnecessary comforts. Such a contingency should always be contemplated by the insured and may be prevented in various ways. Modern income policies, especially, furnish a guarantee against such a contingency by providing that the beneficiary shall, following the death of the insured, receive during the whole of her life, or for a designated number of years as the case may be, an annual, quarterly or monthly income of a stipulated sum. Or, instead of having the proceeds of the policy paid in one lump sum upon death, the insured may arrange to have the company retain the sum upon the maturity of the policy and pay the same in a designated number of installments. Again, the proceeds of the policy may be left with the company for safe-keeping for a designated, number of years.