Policies Classified According to the Inclusion or Exclusion
of a Pure-Endowment Feature. A pure endowment is
a contract which promises to pay to the holder thereof a stated
sum of money if he be living at the end of a specified period,
nothing being paid in case of prior death. Term insurance,
on the contrary, consists of a promise to pay a stated sum in
case of death during the given period, nothing being paid in
case of survival. The two promises are, therefore, exactly
opposite in their nature. They may, however, be combined in
the same contract, in which case the policy goes under the
name of "endowment insurance." Thus a $1,000 twenty-year
endowment policy may be regarded as a combination of
twenty-year term insurance for $1,000 and a twenty-year pure
endowment for an equal amount. In other words the policy
assures the holder that he will receive $1,000 whenever death
may occur during the twenty-year term ; likewise that he will
receive $1,000 in case he outlives the said twenty-year period.
In either case the policyholder receives $1,000, the payment
at death being provided for under the term insurance feature
of the endowment contract, and the payment upon survival
being provided for under the pure endowment.
The mathematical premium for endowment insurance represents the
sum of the premiums for the term insurance and
for the pure endowment. The premium paid at a given age
will be higher for short- than for long-term endowments because
the company must collect a sufficient amount of money so
that together with compound interest it will have the face value
of the policy at the end of the term. Such policies have become
very popular during the past twenty years, and now represent a
very considerable proportion of the total life insurance
written. They may cover any stipulated period, such as ten,
fifteen, twenty, thirty, and forty years. In Great Britain the
tendency has been towards the selection of the longer terms,
while in America the twenty-year period seems to have proved
the most popular, although various companies are now strongly
urging the long-term period with a view to having the policy,
by making it mature at such ages as 60 or 65, afford a convenient
combination of life-insurance protection with provision for old age.
Their contention is that a whole-life policy
is an endowment policy maturing at age 96, according to the
American Experience table, and that by the payment of a
slightly higher premium, or by leaving all dividend accumulations
with the company, the policy should be made to mature
at a more logical age, such as 60 or 65. Premiums are usually
paid on the level plan throughout the life of the contract.
Often, however, long-term endowments for periods like thirty
or thirty-five years are paid for on the -limited-payment plan,
the premiums, for example, being paid during the first ten or
fifteen years, although the face of the policy is not payable until,
say, twenty years after premium payments have ceased.
Many types of endowment policies are issued in addition to
the ordinary form which promises a stipulated amount in the
event of either death or survival. Thus there may be " double
endowments," in which case the pure endowment equals twice
the sum of the amount that will be paid in the form of term
insurance in case of death, or " semi-endowments," where the
pure endowment equals one-half the amount paid upon death.
.Various special types of so-called " child endowment policies "
are also issued. Sometimes these policies provide merely for
the return in full of all the premiums paid in the event of the
child's death, the face of the policy being paid only upon the
child surviving a fixed age. Policies of this character are not
life-insurance contracts in the true sense, but have for their
purpose the accumulation of a fund for business or educational
purposes upon the child attaining a specified age. In other
instances a smaller premium may be charged because only
the payment of a pure endowment is promised, there being no
return of the premiums in the event of the child's death during
the specified term. Again, it may be provided that upon the
death of the purchaser of a child's endowment policy, usually
the father or some other near relative, all premium payments
shall cease, the policy becoming full-paid and the principal
becoming due when the child reaches a specified age. It may
be added that until recently various companies also extended
the pure-endowment feature to the payment of dividends on
various types of contracts. This was done under the so-called
" tontine plan," whereby the dividends were paid only at the
end of a certain number of years, such as ten, fifteen, or twenty
years, provided the policyholder was living at that time, these
dividends, however, being forfeited in case of death before the
expiration of the indicated number of years.
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Classification of policies
