A large
number of the special contracts referred to in the preceding
classification represent in the aggregate only a limited percentage
of the total insurance written. Probably three-fourths of the
total life insurance in America, it has been
estimated, consists of three forms of policies, viz, whole-life
policies on the continuous premium plan, twenty-payment
whole-life policies, and twenty-year endowment insurance.
The remaining one-fourth of the outstanding insurance represents
a vast variety of policies, some differing from others
only in minor particulars. In this respect it should be noted
that many of the foregoing policy features easily lend themselves
to the effecting of an almost endless number of combinations.
Thus there may be issued a limited-payment whole-life
continuous-installment policy, or a limited-payment endowment
policy with the proceeds payable in ten or more
installments. As already indicated, all the various methods
of paying the premium, or of distributing the principal of
the contract, may be applied to any of the ordinary types of
policies written.
The Several Types of Policies Equivalent in Net Cost.
While policies differ greatly in form, it is important to note
that the net premium (the premium before any addition is
made for expenses or contingencies) for all, as will be shown
later, is computed on the basis of the same assumptions.
Thus a company in computing the net premiums for all its
types of policies may use the same mortality table, usually
the American Experience table, and the same assumed rate
of interest, usually 3 or 3y 2 per cent. If this is done, it follows
that all the policies issued by a given company are
equivalent to each other from the standpoint of dollars and
cents.
Some Policies Better Adapted than Others to Meet the
Special Needs of the Insured. Although the policies issued
by a given company are usually equivalent to one another in
net cost, it is highly important to remember that one form of
policy may be much better suited to the needs of the policy-holder
than another. Much has been written lately concerning
the " fitting of the policy to the client," by which is meant that
the various kinds' of policies have certain advantages or disadvantages,
depending upon the circumstances surrounding the
applicant and the particular purpose that he wishes to realize
by the taking out of life insurance. It is therefore highly important
for the salesman, after ascertaining the prospective applicant's
financial ability to pay premiums and the object
which it is desired to accomplish through insurance, to recommend
impartially that contract which will best serve his client.
The matter may be illustrated by the following example : A
merchant may display a large variety of suits of clothes all
valued at the same price. But, despite their common value,
these suits may differ in color, style, and material. One suit
may be totally unfit for the use of a prospective buyer, although
inherently worth just as much as another suit which may be
selected by him as meeting his requirements. In life insurance,
likewise, the many policies on the market may from a
mathematical standpoint be of equal value. But in selecting
a contract the prospective buyer should be careful to see, and
in such selection it is the professional duty of the agent to
render impartial advice, that the character of the policy is
such as to give him what the family or business circumstances
surrounding his life require.
Related posts:
Classification of Annuities
