The Indemnity Element of Life Insurance

is required to compensate this chance; but it has always seemed to me that this element is usefully supplemented by the investment element of life insurance, and that it may be fairly argued that a life policy is the best investment a man can make for the benefit of his family. If an indemnity only were desired, life insurance would logically cease at the age when the need for the indemnity has ceased; that is to say, when a man's working years are past, and he is no longer in a position to earn money by following his trade or profession. In fact, the logical conclusion is that all insurances should be term insurances expiring at about the age of sixty-five. If the argument is pushed still further, it page 7 will follow that no man shall be called upon in any year to pay a larger sum than is necessary to provide the indemnity for the ensuing year, so that life insurance resolves itself into a series of short term insurances, each for the term of one year, the premium of course increasing with the increasing age of the life. Such a plan is, I believe, actually in use in America, and seems to me to be the natural result of giving undue prominence to the indemnity element in life assurance, and neglecting the investment element. This plan is only likely to be popular with those persons who wish to pay at the outset the smallest possible sum, and are satisfied that they can make better use of their money than an insurance office is likely to do; but in this country, whatever theorists may say, the investment element is popular, and I trust that I may be allowed to add that in my opinion it is deservedly popular. Persons who insure their lives are not only willing to pay the higher whole-term premium, but they are willing to pay the higher rate for a participating policy, instead of the lower rate of premium for a policy without participation in profits, because they have a well-grounded belief that the additional payment will be a good investment for the reason I have already mentioned, that in almost all cases the bonuses declared upon participating policies are much more than an equivalent in value to the difference between the participating and non-participating premiums.