Extent to Which Policies Are Lapsed and Surrendered

The importance of allowing surrender values and retaining surrender charges becomes clear when we observe the great extent to which life-insurance policies are terminated by lapse or surrender. Thus, during the year 1913, a typical year for illustrative purposes, the total number of policies issued by all the companies reporting to the Insurance Department of the State of New York amounted to 1,015,788 with an aggregate face value of $1,840,577,945, while the number of policies terminated during the year totaled 564,579 with a face value of $1,043,413,871. The various ways in which these policies were terminated are indicated in the following table:

An examination of the table shows that of the 564,579 policies terminated during 1913, 397,874 were lapsed or surrendered, and that the amount of insurance thus terminated equaled $703,467,768. In other words, the number of lapsed and surrendered policies during 1913 was equivalent to over 39 percent, of the total number of policies written and over 70 percent, of the total number of policies terminated during the year. Slightly over twice as much insurance was terminated by lapse and surrender as in the regular ways, i.e. by death., maturity, expiry or change. As regards twenty-nine of the largest companies reported in the Insurance Year Book, termination by lapse and surrender during the two decades from 1894 to 1913, inclusive, averaged annually 6.79 percent, of the mean policies in force, while during the five years 1909-1913 the percentage averaged annually 5.09 percent.