| THE PRACTICAL BUSINESS OF LIFE INSURANCE. |
By THEODORE WEHLE.
THE mortality tables, forming the theoretical basis of life insurance, having been explained, it remains to be shown how they are employed in practice. There is a fundamental difference between life and fire or marine insurance that must first be considered. The hazard attaching to a building or a ship may remain unchanged for a very long term of years, and the rate of premium once determined need not be altered. Such property is usually insured for one year at a time, and renewed as often as desirable. But the same methods can not be applied to human life. If the policy were to terminate annually, and a new examination could be demanded, many persons whose health had become impaired would be declined at the beginning of every new year. Then, as has been shown, from a very young age, upward, the rate of mortality constantly increases. That would necessitate a higher premium charge from year to year, so that, finally, a person who should be fortunate enough to reach the highest age of the table would have to pay one hundred per cent, for that one year. It requires no argument to prove such a system impracticable, and therefore the plan of fixing one uniform periodic premium for the whole term of the proposed insurance has been adopted.
The following table shows, in one column, the amount of net premium that must be paid at the beginning of every year to insure 81,000 for that year; and, in the other column, the equal net annual premium to insure for life.
By net premium is meant the amount calculated from a certain mortality table, and rate of interest, without any addition for expenses.
In all illustrations hereafter given the American Experience Table and four and a half per cent, interest will be employed, that being the official standard for the State of New York.
| Age. | Net premium for one year. |
Net annual premium for life. |
Age. | Net premium for one year. |
Net annual premium for life. |
| 20 | $7 47 | $11 97 | 60 | $25 54 | $54 14 |
| 21 | 7 51 | 12 23 | 70 | 59 61 | 97 00 |
| 22 | 7 57 | 12 50 | 80 | 138 24 | 188 20 |
| 90 | 434 96 | 494 33 | |||
| 30 | 8 06 | 15 34 | 94 | 820 22 | 836 69 |
| 40 | 9 37 | 21 30 | 95 | 956 93 | 956 93 |
| 50 | 13 19 | 32 49 |
From this table it appears that, to insure $1,000 for one year at a time, it would cost $7.47 at age 20, and that the amount would have to be continually increased, until at age 90 it would be $434.96, while
