Advantages of the Continuous Installment Plan

Careful consideration of the continuous-installment feature in life insurance will convince one of its advantages as compared with other forms of settlement and with other methods of investment as regards reliability, economy and convenience. In view of the financial stability of our well-established companies, the plan furnishes an absolutely certain income for dependents. Not only does it guarantee an income to the beneficiary throughout life, but, owing to the installments certain, the income continues sufficiently long to secure the proper education and maintenance of the children. It also eliminates all details of administration on the part of the insured or beneficiary and secures them against the hazards and expense connected with the investment and management of an estate. To quote an excellent statement of its functions:

This policy may be made to provide support for the widow during the remainder of her days; to educate the children; to give independence and protection to the unmarried daughters. In a word it may be made to provide unfailing support for any or every dependent. This policy appeals to men in every rank of life; to the man of limited means who is unable to purchase a home, because a minimum policy may pay the widow's rent for life; to the man of moderate means whose family is accustomed to use a larger income and to the man of affluence whose family is trained to spend a munificent allowance because by means of an adequate policy each may solve the problem of how to guarantee the continuance of the accustomed family income after his death.

View Graph.

The foregoing advantages become especially apparent when we reflect that the premium on a continuous-installment policy is considerably below that charged on a policy of a like amount when payable in one sum. An examination of the rates furnished in the graph (being those charged by the company used for illustrative purposes in preceding chapters) will show, for example, that when the ages of the insured and beneficiary are respectively 25 and 20 the annual premium on a whole-life policy payable in installments of $50 for twenty years certain and thereafter during the lifetime of the beneficiary is only $17.64 as compared with a premium of $19.00 for a $1,000 ordinary life policy at age 25 payable in one sum. As the age of the beneficiary increases, as compared with that of the insured, it will be observed that the premium on the continuous-installment policy decreases, the rate, for example, being only $15.44, when the ages of the insured and beneficiary are respectively 25 and 45, as compared with the $19.00 rate on an ordinary life policy. The reason for this difference in the rates has already been explained as far as the installments certain are concerned. The continuous-installment feature is an addition to the ordinary installment part of the contract and must, of course, be charged for in order to enable the company to meet its liability for those installments which it may have to pay to the beneficiary in case she should outlive the insured by more than twenty years. But this extra cost is slight because it is apparent that where the ages of the insured and beneficiary are about the same, and especially where the beneficiary is much older than the insured, there will not be on the average many instances where the beneficiary will outlive the insured by more than twenty years; furthermore, as regards the limited number of cases where the continuous feature goes into operation, the number of installments payable will not average high.