International Styles

Development Of Disability Insurance

A new clause has appeared in life-insurance contracts in the United States in recent years, granting protection against the risk of total and permanent disability. The first known instance of its kind appeared on October 16, 1896, when an American company issued such a policy on the life of its president. Since then interest in the clause has grown so rapidly that nearly one hundred and fifty companies are now using it. Insurance against disability is not in itself new. Under the name of invalidity insurance it forms a prominent feature of the workmen's insurance laws of a number of European governments, where protection has long been granted against both temporary and permanent invalidity caused either by accident or disease. As early as the eighteenth century invalidity insurance was furnished to members of the mutual aid societies of Germany and Austria and it was extended rapidly in the nineteenth century to many classes of workers. The friendly societies of Great Britain and the fraternal orders and labor unions in the United States have likewise paid disability benefits. With the stock companies in the United States insuring accident and health risks this sort of protection has, of course held first place, but the value of accident and health policies has been greatly restricted by the fact that these companies issue a one-year term contract and possess the option, therefore, of refusing to renew at the time when the insured may be most in need of the protection.

The incorporation of disability protection in a life-insurance contract is a recent innovation, as stated above, and marks the introduction of a new principle, namely, that of permanent protection against the risk in question. Furthermore, while the accident and health companies insure against disability of any duration, the clause used in life-insurance contracts in the United States covers only those cases which are both permanent and total. It is not, in itself, therefore, full and complete protection against disability, but a supplementary feature added to the life contract to cover contingencies not comprehended in insurance against death. Permanent and total disability may endanger the permanence of a man's insurance by cutting short his income and making it impossible - for him to pay further premiums; or disability may have the same effect as old age - the man being no longer a producer should be cared for by his accumulated capital, While the occurrence of this risk, therefore, places a man or his dependents in the same position as old age or death the regular life-insurance contract furnishes no protection against it.

The German insurance companies were the first to incorporate a disability clause in their life contracts. It was used there as early as 1876, and since 1900 has been adopted by most of the leading companies. Two forms of contract have been used, the first, issued in connection, with regular term, life, or endowment policies, promising to waive payment of premiums after disability or to mature the policy and allow it to be paid in installments over a period of from ten to twenty years. The second form of contract is a life annuity payable from the time of disability until death, purchased independently of any insurance policy, and paid for by a single, or by annual premiums, each payment creating the right after three years to an annuity based on the age at which the payment is made. The disability insurance ceases in either form of contract at age 65. The Russian companies issue a clause with participating policies whereby, upon relinquishing the right of participation the insured may receive disability insurance in lieu thereof; and in case of disability premiums cease and a cash payment of 50 to 75 percent, of the amount insured is paid at once, the remainder at death or at the end of the endowment period. The disability clauses used in the United States are modeled closely on that form in Germany which is incorporated in a life-insurance contract and which promises to make the policy full-paid or to mature it when disability occurs. So generally has it been adopted that on January 1, 1912, sixteen years after its first appearance, the companies using the clause had on their books over 78 percent, of all the insurance in force in the United States. And since the latter date this proportion has been increased by the addition of a number of the larger companies which had not previously adopted the clause.

Sections in Chapter 22.

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