Insurance
THE IMPORTANCE OF SURRENDER VALUES.
THE principal object I have in view when writing about insurance is to explain the advantages which it offers, and the way in which different circumstances can be provided for and to persuade people, if I can,-that it is a good thing for them to take out suitable policies for as much as they can afford. - - In a former article I pointed out that if a man knew the time at which his death would occur, the choice of the best policy would be a comparatively simple matter. If we cannot be wise before the event, the next best thing is to choose a policy that is as adaptable as possible to any circumstances which the future may bring. If we take a whole-life policy, in order to_ provide a large measure of protection for dependents in the event of our early death, we may live to sixty or sixty-five and discover that the need of provision for others no longer exists to any great extent ; that it is inconvenient to continue the payment of premiums, and that we should like a capital sum for our own use. These requirements, which were not specifically contemplated when the policy was originally effected, can be met by surrendering the policy for a cash payment. By doing this we convert a whole - life policy into endowment assurance. For example; a man aged 35 might take a whole-life policy for £1,000 at a premium of 128 a year and in 30 years would have paid £840. On reaching the age of 65, he could surrender the policy and all the reversionary bonuses which have been declared upon it for -a cash payment of about £960. If, however, he had originally taken an endowment assurance policy payable at the end of 30 years, or at death if previous, he might have received £1,500 at age 65 instead of £960, but under this endowment assurance policy a very much smaller sum would have been paid to his estate in the event of his death within the 30 years. The whole-life policy provides much greater protection for dependents, and the endow- ment assurance gives a higher return, if the assured survives to the end of the endowment period.
This is only one example out of many that could be given of the importance of liberal surrender values. We may at any time want to surrender our policy for a cash payment, or we may want to borrow on the security of the policy. Some companies give surrender values that are generous and adequate, while others give compara- tively small amounts.
Surrender values and other policy conditions ought to be carefully looked into before a policy is effected, because afterwards it is too late. The majority of policy- holders, failing to realize the cost and the value of insurance protection, think that even liberal surrender values are far too small. Probably the majority of Life Offices give smaller amounts than they properly should. There are still some actuaries who hold the view that policy-holders ought to be somewhat heavily penalized for discontinuing the payment of premiums and sur- rendering their policies for cash or paid-up assurance.
They maintain that a policy-holder who retires in this way should be replaced by a new policy-holder, and that the cost of obtaining the new member ought to be paid by the old. Modern ideas are against this attitude. It is true that it is an expensive business to obtain new policy-holders, and clearly the expense attaching to the process ought to be paid by the policy-holder on whose behalf it was incurred. Hence for the first few years the surrender values ought to be comparatively small, but when these preliminary expenses have been paid the policyholder should be allowed the full reserve that id held for his polick. As I.have said -many-times, part of each premium paid is accumulated as in a savings bank; so that it will amount to the sum assured by the latest date at which the policy can become a claim ; other' parts of the premium are paid for insurance protection and other purposes. I can see no legitimate reason foJ Life Offices being the only savings banks which do 1-1,0 allow their depositors to withdraw the whole amount standing to their Credit.
WILLIAM SCHOOLING.
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