Distinctive Features of the Policy

In most respects the industrial policy is similar to that issued to ordinary life policyholders; nor do the contracts of the various industrial companies differ much in their essential terms. A few provisions, however, are so peculiar to industrial policies and have such an important bearing upon the business as to merit special mention. These may briefly be referred to under the following heads:

1. Benefits during the first year. It is customary for the company to pay only one-half of the insurance in the event of death before the policy has been in force sis months, the full amount being paid if death occurs after six months from the date of the contract. In some instances the practice is followed of paying only one-third of the insurance if death occurs during the first six months following the issue of the policy, one-half if it occurs after six months and within one year, and the full amount if it occurs after one year.

2. Special provisions affecting the policyholder. Most of the privileges granted to industrial policyholders are also found, as regards the principles involved, in ordinary life contracts. Some of these provisions, however, must be adapted to conform to the special requirements of the business. Thus four weeks' grace is allowed the policyholders in the payment of premiums, and reinstatement is usually permitted within one year from the date of lapse provided all arrears are paid and the company is satisfied with the insured's physical condition. The "incontestible" and "misstatement of age" clauses are similar to those found in ordinary policies. It is also the general rule to provide that the insured may pay his premiums at the home office so that, in case the agent should fail for some reason to collect the premium at the home of the insured, he is obliged to pay the same at either the home or district office before the expiration of the four weeks' period of grace.

Some companies give the insured, in case he is dissatisfied with his contract, the privilege of surrendering the same within two weeks after its issue and receiving a refund of the premium. Other companies, again, give the insured the option of converting his industrial policy into one on the ordinary plan, provided that when application for such conversion is made the insured has attained a stated age (usually 18 or over), has paid all his premiums for ten or some other stipulated number of years, and can offer satisfactory evidence of insurability. In making such conversions it is customary to give the full legal reserve as a surrender value and to apply the same in payment of premiums on the ordinary policy. It is also interesting to note that some of the companies allow their policyholders to participate in the management by voting either in person or by proxy; but the exercise of this right to vote will necessarily be limited when it is realized that one company granting the privilege recently had over 2,300,000 policies in force and another nearly 13,000,000.

Like ordinary policies, industrial contracts contain cash, paid-up, and extension clauses to apply in the event of lapse, but cash surrender values are not paid, as a rule, until after the policy has been in force for a period of, say, ten years. Until recently most industrial policies were issued on the non-participating plan, yet the leading companies followed the practice for years of distributing large surplus accumulations to their policyholders in the form of voluntary dividends, which might otherwise have been paid to the stockholders.

3. Provisions protecting the company. As previously stated both infantile and adult policies are limited to certain ages as regards their issue, and also contain restrictions as to the maximum amount of insurance that may be taken out at certain ages. Aside from these limitations, industrial policies are comparatively free from the restrictions frequently found in ordinary contracts, especially as regards occupation, residence, military service, suicide, etc. The companies, however, have found it desirable to limit the powers of their agents by incorporating a clause which, to use the wording adopted by one large company, provides that "no condition, provision or privilege of this policy can be waived or modified in any case except by an endorsement hereon signed by the president, one of the vice-presidents, the secretary, one of the assistant secretaries, the actuary, the associate actuary or one of the assistant actuaries. No modification or change shall be made in this policy except such as is in accordance with the law of the state in which the same is issued. No agent has power in behalf of the company to make or modify this or any other contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the company by making any promise, or making or receiving any representation or information".

4. Rules relating to the beneficiary. Except in the case of minors, it is the general practice to require the beneficiary's specific consent to the insurance before the same will be written. Likewise, policies will not as a rule be issued, except for a limited amount, to non-relatives or others who do not possess an insurable interest in the life which is to be insured. "This means" to quote the rule of a certain large company, "that the beneficiary must be dependent upon the insured for support, or that the insured is indebted to the beneficiary in an amount sufficient to justify the sum insured, or that the beneficiary has some other substantial pecuniary interest in the life insured, or will be liable for the expenses of the sickness and burial of the insured". Importance should also be attached to the policy requirement that "the company may make payment either to the beneficiary above named, if living, or to such other living beneficiary as may be duly and finally designated, and recognized by endorsement hereon, or to the executor or administrator of said insured, or to any relative by blood or connection by marriage, or to any person appearing to the company to be equitably entitled thereto by reason of having incurred expense in any way on behalf of the insured for burial or for any other purpose; and the receipt of any such payee shall be conclusive evidence that payment has been made to the person or persons entitled thereto and that all claims under this policy have been fully satisfied".