ENDOWMENT INSURANCE. Premiums Charged for Endowment Policies

Premiums Charged for Endowment Policies. Since the
company^s liability under an endowment policy involves not
only the payment of the insurance upon death but also the
full amount of the policy upon survival of the term, it follows
that the annual premium on such policies is necessarily much
higher, except for very long endowment periods where the
rate is only slightly higher, than that charged on an ordinary
life policy. An examination of the following table of rates
(charged by the same company whose rates were used for
purposes of illustration in the preceding chapters) shows
this to be especially true when the endowment period is a
short one. The large difference here indicated, although ac-
counted for in part by the heavier loading on endowment
premiums, is due chiefly to the necessity of accumulating
more rapidly the investment portion of the endowment policy
in order to have it equal the full face value at the end of the
term. Referring to previous chapters, we saw that the reserve
value of the $10,000 ordinary life policy at age 35, used for
illustrative purposes, was $3,275.80 after the policy has 'been
in force twenty years, while for the same policy on the twenty-
payment plan the corresponding reserve value was $6,099.20.
The $10,000 twenty-year endowment policy, however, must,
according to its definition, have a value of $10,000 at the end
of the twenty-year period, and the difference between this
value and the values noted for the other two policies must
be obtained by the company through a higher premium.

Related posts:
ENDOWMENT INSURANCE. Definition and Types of Policies.