ABSTRACT
Mr. Editor: – In a late number of the Secretary, I observed an article calling the attention of ministers to Life Insurance; and since that time the Prospectus of the ‘Connecticut Mutual’ has fallen into my hands. It appears to be an able and impartial document; and the perusal will enable one who takes out a policy, to do so understandingly. Whether a preacher should secure his family by Life Assurance seems to depend on the question, – Is it for his interest, under the restrictions, and on the terms proposed? There are obviously various considerations, a few of which opportunity is here taken to present. If mistaken in any point, the writer is ready to stand corrected.
A minister has had his life assured for $1000, and his death places that sum at the disposal of his widow. She may leave the $1000 with the Company, and for an equivalent, if her age be then fifty-one years, receive $80 a year during the remainder of her life. But should her health be infirm and feeble, prudence dictates that the assurance should be taken out, and placed where, in the event of a speedy demise, her children may have the principal. In this case she incurs, without a husband’s assistance, the risk and trouble of a new investment.
A pastor, who has insured on the system of annual payments, is during his last years, superannuated. So far from continuing his yearly sums, he himself needs the benefit of his former deposits. But failing to make payment at the time, the policy is forfeited, and he loses the whole. To avoid this loss he may seasonably “surrender his policy and receive its equitable value in cash,” to be invested elsewhere. Or in its stead, he may agree for an equivalent life annuity, or accept of a smaller joint annuity on his life and that of his consort, payable yearly as long as either shall survive. A European writer of celebrity lays down the general principle: – “That all savings from the earnings of labor ought to be made before the age of fifty-five years; that between the ages of 55 and 65, a man should expend 162the labor barely sufficient for his maintenance; and that for the portion of life after the age of 65, he should subsist entirely on previous savings.” 1
The value of Life Insurance would be greater to ministers, were they as a class, short lived, or exposed like seamen, to fatal accidents, Statistics however, show, that of all professions, ministers have the longest lives. Prof. Caspar of Berlin made extensive researches, 2 and found, that of a hundred individuals in each calling, the numbers living at the age of seventy years, were –
Divines,
42
Agriculturalists,
40
Advocates,
29
Teachers and Professors,
27
Physicians,
24
The results indicate that divines have much the greatest probable duration of life. Dr. Nott of Franklin 3 is a well known example of this class. – But living beyond the average duration, so much the more costly becomes the normal Assurance.
Compare now deposits in a Saving’s Bank. A pastor at the age of thirty years puts in $30 bearing interest at five per cent. He takes care to deposit the same amount every year, compounding the interest. The arithmetic of annuities will serve to determine the future amounts. Continuing the annual deposit regularly, as for Insurance, during thirty four years, (the expectation of life by Milne’s Carlisle table,) he would then be the possessor of $2,550. The corresponding Assurance is but $1500; which however is increased by the variable dividends of the Company. “It is well known,” Dr. Price strikingly remarks, “to what prodigious sums, money improved for some time at compound interest will increase. A penny so improved from our Saviour’s birth at five per cent would in 1791 years amount to 144 millions of globes, each equal to the earth in magnitude, and all solid gold.” 4 The illustration will not be without its use, to a systematic economist.
The current Assurances appear to be graduated on the principle of the English table, that the sums paid into the hands of the company avail them but three and a half per cent. This makes the premiums too high, or the final assurance in return, too small. The writer of the document before named, answers this objection (p. 11.) by saying, – “that the excess of premium is for the purpose of creating a fund to meet extraordinary losses. This excess of premium is not lost to the assured in this company, as they receive all the excess, after paying losses and expenses.” But if all the assured are members of the company, and share in its gains and losses, higher rates than the equitable, appear much less necessary. There may be some reason not duly appreciated; but the explanation appears hardly sufficient. A long accumulation of capital in England has indeed reduced the rate of interest to three, or three and a half per cent: but the corresponding 163rate with us, is not less than five per cent. Were our tables calculated with this rate, a smaller premium would secure $1000 assurance, and the company would still have a like security with the English: First there is advertised a present capital of $50,000, which like a balance-wheel serves to equalize the irregular failure of lives. And since the tables are graded for the mortality of the whole population indiscriminately, by insuring none but healthy lives, a constant gain will accrue from this source. Further, there is the income from expired insurances, cancelled policies, and the surplus interest on premium invested at a higher rate than that of the tables of assurance. It is therefore, believed that a set of new tables of assurance calculated at five per cent would be safe, enlarge the sphere of operations by reducing the cost, and prove mutually advantageous; – we are not prepared to call the present rates disadvantageous.
