Classification of Premiums as Single and Periodic
Life-insurance policies may be purchased by a single premium, an annual
premium, or a premium paid weekly, monthly, quarterly, or semi-annually.
Of these the annual premium is by far the most important and may continue
until the death of the policyholder or the maturity of the policy or may
be limited to a definite number of years as in a twenty-payment life policy
and a twenty-payment thirty-year endowment. In the twenty-payment life policy,
for instance, the premiums continue for twenty years provided death does
not intervene before this period has elapsed and after the twenty payments
have been made the policy requires no further payments and matures whenever
death occurs. Few insurance contracts, with the exception of annuities,
are purchased by single premiums, although they may be so purchased and
the companies will quote single premium rates for any kind of policy. Nevertheless,
in taking up the subject of rate computation in life insurance it is necessary
to begin with a thorough study of the single premium, inasmuch as it furnishes
the method of approach in determining annual premiums.