Life Insurance as a Means of Indemnification Against

Life Insurance as a Means of Indemnification Against
Loss Through the Death of Officials and Valuable Employ-
ees. Turning now to a discussion of the numerous business
uses to which life insurance lends itself, we find that one
field for its application consists of the numerous businesses
which depend upon, in fact have been built around, some one
man whose capital, energy, technical knowledge, experience,
or power to plan and execute make him a most valuable asset
of the organization and a necessity to its successful operation.
Numerous examples may be pointed to as illustrating the dependence
of successful business upon the personal equation.
Thus a corporation or firm may be vitally interested in one of
its officers whose financial worth as an indorser, or whose
ability as an executive, may be the basis of its bond issues or
bank credit. A manufacturing or mining enterprise may be
dependent upon someone who alone possesses the chemical or
engineering knowledge necessary to the concern. A publish-
ing house may have engaged someone who alone can be the
author of a proposed work and may be obliged to incur con-
siderable outlay before it is written. The sales manager of a
large business establishment' may have made himself indis-
pensable through his ability to organize an efficient body of
salesmen, to employ the most effective methods of selling,
and to develop profitable markets. Again, some officer of the
concern, although not actively engaged in its daily operations,
may prove indispensable because he is its principal owner and
because his experience and business connections make him
its chief adviser.

These are only a few illustrations of the many that might be
given to show the importance of a human life as an asset to the
successful operation of a business. Now why not insure the
business against the loss of that life that asset through
death? Surely, the extinction of such valuable lives will in
many instances prove a more serious loss than that by fire or
any of the other sources of loss in business against which
insurance is invariably procured. The death of the officer
whose indorsement or executive ability is the basis for the
firm's bank and bond credit might result in a refusal on the
part of lenders to renew old and make new loans, thus possibly
jeopardizing the business because of a lack of capital. If
adequately insured, however, for the benefit of the business,
the firm would immediately upon his death receive the face
value of the policy. Not only would the insurance proceeds
help to enable the company to meet any obligations falling
due during the period of adjustment, but the mere knowledge
that the business was the recipient of a large amount of cash
would be a powerful factor in allaying doubt and in restoring
confidence on the part of creditors. Similarly the death of
the person who alone possessed the chemical and engineering
knowledge required by his employer might result in the lower-
ing of the quality or the volume of the output of the com-
modity in question, thus causing much inconvenience and pos-
sible loss of business; while the death of the sales manager
might involve the disintegration of the selling force and the
consequent loss of profitable markets. Furthermore, in niany
instances an untimely death may leave a special piece of work
unfinished and subject the employer to a loss of the advances
made, since no one else can be found to bring the unfinished
project to completion. Here the amount of life-insurance pro-
tection may be made to equal approximately the outlay in-
curred, and if the work is known to require only a few years
for its completion, the term of the policy may be made to
cover only this limited period. Such short-term policies also
often prove desirable for the protection of a business against
the death of its owner or manager during the first five or ten
years required for the business to become firmly established.
All losses of a character like those enumerated may be
guarded against by making the business the beneficiary of a
sufficiently large policy on the lives of the officers or employees
under consideration. 1 In the event of death the business will

2 The following may be mentioned as a few of the notable in-
stances of business insurance which are commonly cited as illus-
trative of the extent to which certain men use life insurance for the
benefit of copartnerships and corporations: George E. Nicholson,
Kansas City, $1,500,000 in favor of four cement companies of which
he is president: H. X. Byllesby, Chicago, $1,250,000 as managing
engineer of electric companies; John H. Jones, Pittsburgh, $1,000,000
in favor of the Pittsburgh-Buffalo Co., of which he is president;
John H. MacMillan, Minneapolis, $500,000 in favor of the Carigal
Elevator Co., of which he is vice-president; F. B. Wells and F. T.
Heffelfinger, Minneapolis, $500,000 each in favor of the F. H. Peavey
Co.; and Arthur S. Ford, $1,000,000 in favor of the Portland Cement
Co., of which he is treasurer.

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