Life Insurance Makes Saving Possible

Life Insurance Makes Saving Possible. One constantly
meets with those whose argument against life insurance is that
they prefer to save. The habit of saving should by all means
be encouraged, but it should be borne in mind that the saving
of a competence involves the necessary time to save, and that
life insurance is the only certain method to use as a hedge
against the possibility of the saving period being cut short.
A policy of saving can yield only a small amount at the start,
while a policy of insurance from its beginning guarantees the
full face value and thus safeguards the policyholder against
failure through early death to have sufficient time to save
adequately through other channels. Thus, if one is able to
save $500 annually it will take nearly fifteen years to accumu-
late a fund of $10,000, assuming that the accumulations are
safely invested annually at 4 per cent, compound interest.
Yet the resolution of the head of the family to protect the
home with such a savings fund is contingent upon his sur-
viving the full period, and may be defeated by death before
the savings have reached any appreciable sum. To depend
entirely on saving as a means of providing for the future of
the family is, to say the least, a highly uncertain policy to
pursue. The first requisite in providing for the future sup-
port of dependents is absolute certainty, and this can be
secured only by using life insurance as a hedge against the
possible failure to continue the annual accumulations to the
savings fund because of early death. Through life insurance
the suggested fund of $10,000 can be assured in any case.
Upon death the insurance company pays the face of the policy,
while in case of survival the insured is given the necessary
time to accumulate a competence.
Moreover, the roseate views which so many hold concern-
ing their resolution and ability to accumulate and keep should
be tempered by a frank statement of the distressing facts as
they actually exist. Eighty-five per cent, of this country's
adults leave no estate at all, and about one-third of the
widows in the country lack the necessities, and 90 per
cent, the comforts, of life. The habit of saving, as already
stated, should be encouraged, but the foregoing facts clearly
indicate that it is unwise to practice saving to the exclusion
of life insurance. Both should be practiced, and, if only one
is possible because of limited means, insurance should be
selected because of its much greater certainty in leaving a
stipulated fund for the support of the family whenever the
breadwinner's income-producing capacity ia cut short by death.
Furnishes a Profitable and Safe Investment. In addi-
tion to guaranteeing an estate at once, life insurance contains
an investment feature which is absolutely safe and which
reaches large proportions in the later years of the policy.
With the exception of a few types of policies only, life insur-
ance represents an accumulation of savings admirably adapted
to put small sums of money to prompt and profitable use, and
in this respect has been aptly defined as " compound interest
in harness." As will be explained later, nearly all types of
life-insurance policies gradually accumulate a so-called sur-
render value which may be withdrawn by the insured if he
decides to discontinue the policy. This value, as will be
shown later, represents an accumulation of a portion of the
premiums paid by the policy holder which the company
promptly invests at an assumed rate of interest ; and in mutual
companies the interest earnings in excess of this assumed rate
are returned to the policyholder. In other words this value
of the policy represents savings left with the company. Past
experience shows that on the average life-insurance companies
have earned on the savings left with them by policyholders
the largest interest returns consistent with safety. Owing to
the mathematical and scientific character of life insurance
and the stringency of government supervision of the com-
panies, there has not been a failure of a large and well-
established life-insurance company in the last quarter of a
century, and this is true despite the fact that we have wit-
nessed three severe financial panics during the last twenty-
five years. Nearly every company devotes the greatest care
to its investments, which are spread out over such a large
number of securities and other forms of property that a loss
on one investment will be fully counterbalanced by profits on
another. The investments of nearly every large company are
in the special care of investment managers, and the skill with
which they are made may be illustrated by the experience of
one of the largest companies in America, which, valuing its
securities at the lowest quotations prevailing in the severe
panic of 1893, could still show an excess of $20,000,000 over
and above the purchase price of those same securities. More-
over, an examination of the present earnings of life-insurance
companies, shows that the great majority make between 4^
and 5 per cent, on their total assets, while in some instances the
returns exceed this amount.
Not only does life insurance thus furnish a profitable and
safe investment, but modern policies also make it possible
for the insured to arrange for the safeguarding of the pro-
ceeds of the policy upon his death for the benefit of his bene-
ficiaries. Too frequently the competence which a husband
or father has provided through saving or insurance is quickly
lost by the heir or beneficiary through speculation, unwise
investments, or excessive expenditures for unnecessary com-
forts. Such a contingency should always be contemplated by
the insured and may be prevented in various ways. Modern
income policies, especially, furnish a guarantee against such
a contingency by providing that the beneficiary shall, follow-
ing the death of the insured, receive during the whole of her
life, or for a designated number of years as the case may be,
an annual, quarterly or monthly income of a stipulated sum.
Or, instead of having the proceeds of the policy paid in one
lump sum upon death, the insured may arrange to have the
company retain the sum upon the maturity of the policy and
pay the same in a designated number of installments. Again,
the proceeds of the policy may be left with the company for
safe-keeping for a designated number of years.

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