Definition and Types of Policies
All the policies discussed in the three preceding chapters provide for
the payment of the full amount of the policy only in the event of death.
Endowment policies, on the contrary, provide not only for the payment of
the face of the policy upon the death of the insured during a fixed term
of years, but also for the payment of the full amount at the end of said
term if the insured be living. Whereas policies payable only in the event
of death are essentially taken out for the benefit of others, endowment
policies, although affording protection to others against the death of the
insured during the fixed term, usually revert to the insured if he survive
the endowment period. Such policies, therefore, have become popular in recent
years as a convenient means of accumulating a fund which will afterwards
become available for the use of the policy-holder.
An examination of the contracts issued by different companies shows many
variations in the use of the endowment-insurance principle. Such policies
may be made payable in ten, fifteen, twenty, twenty-five, thirty or more
years, or the length of the term may be so arranged as to cause the policy
to mature at certain ages, such as 60, 65, 70, etc. When written for such
terms the purpose of the policy usually is to combine immediate protection
with saving; while if written for long terms or to mature at an advanced
age the object is usually to combine protection with old-age provision.
Usually the contracts are paid for by premiums (payable annually, semi-annually
or quarterly) continuing throughout the term, but if desired the premiums
may be paid on the limited-payment plan, as, for example, a thirty-year
endowment paid-up in twenty years.
Other applications of the endowment principle have already been referred
to in the chapter on "Classification Of Policies", but
may again briefly be recapitulated. Thus there may be "double endowments"
or "semi-endowments", the first meaning that the amount payable upon survival
is twice that paid in the event of death, and the last meaning that the
sum payable upon survival is only half as large as the amount promised upon
death. Various kinds of "child endowment policies" are also issued by certain
companies. Sometimes these policies, besides guaranteeing the payment of
a fixed amount upon the attainment by the child of a specified age, also
provide for the return in full of the premiums paid in the event of the
child's death before reaching the endowment age. Or, the policy may be issued
without the return of premium privilege in the event of the child's death,
the only benefit under the policy in this instance being the amount payable
on survival. Sometimes it is provided that upon the death of the purchaser
of the policy, usually the father, premium payments shall cease, the policy
becoming full-paid and the principal becoming due when the child reaches
the endowment age. In still other instances the policy may be issued on
a child's life at an early age, say at age five, the understanding being
that the policy will not come into full force until the insured reaches
a specified age (say age 21) and will then mature as an endowment at, say,
age 50. These policies, furthermore, may again be issued with or without
the return-premium privilege.
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