Life Insurance as a Means of Making Contingent Interests Marketable

One of the minor functions of life insurance is its use in making contingent interests marketable. Reference is had especially to the use of so-called contingent or survivorship policies which expressly provide that the face of the policy will only be paid upon the death of the insured if some other designated person is still living at the time, i.e. the policy is said to insure one life against another. The function of such contracts becomes apparent when we reflect that frequently the owners of estates bequeath the entire income to the widow throughout her lift? the property itself to be distributed upon her death to certain heirs who may then be living. Such heirs, it is clear, possess a valuable right under the will, but it is a contingent one and may be lost in case of death during the lifetime of the widow. Manifestly, it will be most difficult for any such heirs to give this contingent interest a marketable value for the purpose of a sale or a loan unless some means can be found to protect the purchaser or lender against the loss of the interest through the death of the heir before the death of the widow. Such protection is furnished most cheaply through a so-called contingent or survivorship policy. Thus let us assume that A is entitled to property contingent upon surviving B, who is the life-tenant of an estate. Save as a speculation, depending largely upon the condition of B3s health, the contingent reversion has no realizable value. But this contingent interest may be converted into a marketable proposition through a life insurance policy payable only upon A's death during the lifetime of B. Such policies may be secured by the payment of a single premium in advance, or may be paid for by annual premiums continuing during the joint duration of the two lives.