Premiums Charged for Endowment Policies
Since the company's liability under
an endowment policy involves not only the payment of the insurance upon death
but also the full amount of the policy upon survival of the term, it follows
that the annual premium on such policies is necessarily much higher, except
for very long endowment periods where the rate is only slightly higher, than
that charged on an ordinary life policy. An examination of the following table
of rates (charged by the same company whose rates were used for purposes of
illustration in the preceding chapters) shows this to be especially true when
the endowment period is a short one. The large difference here indicated, although
accounted for in part by the heavier loading on endowment premiums, is due chiefly
to the necessity of accumulating more rapidly the investment portion of the
endowment policy in order to have it equal the full face value at the end of
the term. Referring to previous chapters, we saw that the reserve value of the
$10,000 ordinary life policy at age 35, used for illustrative purposes, was
$3,275.80 after the policy has been in force twenty years, while for the same
policy on the twenty-payment plan the corresponding reserve value was $6,099.20.
The $10,000 twenty-year endowment policy, however, must, according to its definition,
have a value of $10,000 at the end of the twenty-year period, and the difference
between this value and the values noted for the other two policies must be obtained
by the company through a higher premium.
Premium Rates For $1,000 Endowment Insurance.
|