Having re-
ferred to the shortcomings of limited-payment policies when
viewed in the light of special circumstances, we may next
note the conditions under which this method of paying pre-
miums may prove desirable. Certainly, the willingness to
pay a larger annual premium must be justified by advantages
which will compensate for the sacrifice. Two important ad-
vantages present themselves and may be stated briefly as
follows :
1. Premium payments may ~be limited to the produc-
tive period of life. Instead of continuing for an indefinite
period, the premium-paying years may be so limited in num-
ber as to correspond to the income-producing years. Not
only is there satisfaction for many people in knowing the
maximum amount which they can be asked to pay on a pol-
icy, but for the great majority of men between the ages of
25 and 40, engaged in the average walks of life, the next
thirty, twenty, or fifteen years, depending upon the age under
consideration, represent the really productive period of their
working lives. As regards the great majority, these years,
and not the years of old age, can through a little extra effort
and economy be made the years of surplus. It is therefore
argued that the average man should take advantage of that
period in his working life when money comes in most freely,
to pay a somewhat higher premium, in order to free himself
in old age from any payment whatever. Using the rates
cited above, a person insuring at age 25 is given the option
by the company of making his whole-life policy paid-up bj
the time he becomes forty-five years old by paying an extra
annual sum of $7.75 per thousand dollars of insurance for
twenty years. As previously stated, less than one in ten of
our population succeeds in accumulating a reasonable com-
petence by the time age 50 is reached, and through reverses in
business or investments a great majority of this limited
number lose the same before death. Now why not use the
productive years, the supporters of the limited-payment plan
argue, to protect one's insurance against such a contingency?
As the management of one company admirably states in re-
ferring to a twenty-payment life policy : *
The period, of twenty years is not so short as to make the dis-
count of future payments too heavy, nor so long as to extend
these payments far into the future, thereby defeating the wise
purpose of avoiding them late in life. . . . After twenty years
the insured has completed his side of the agreement and reaps
the reward of prudence and persistency. His estate, the value
of the policy, is an accomplished fact bought, paid for and
standing to his credit. Nothing can take it from him, nothing
can reopen the account it is beyond peradventure. At his
death the company instantly discharges its side of the contract
by the simple transfer of the property. . . . Here then, is a
present plan for future security. The ordinarily vigorous and
most productive years of life pay toll for the fullness of years
sometimes attained without fullness of pocket. Thus the bur-
den is put where it can more easily be carried, and the relief
in later life always abundantly justifies the earlier foresight.
2. Combines saving with insurance. The limited-
payment life policy affords the advantage of combin-
ing saving with insurance, assuming that the policyholder
desires to accomplish this purpose, to an even greater degree
than was noted in connection with whole-life insurance by
continuous payments.
Related posts:
Disadvantage of Continuous Premium Payments
