BUSINESS & INVESTMENTS

“CHOICE OF POLICIES” IS VERY IMPORTANT DECISION

There Is An Obligation to Arrange So That Your Debts and Funeral Expenses Will Be Looked After

A . M . ALLAN January 15 1924
BUSINESS & INVESTMENTS

“CHOICE OF POLICIES” IS VERY IMPORTANT DECISION

There Is An Obligation to Arrange So That Your Debts and Funeral Expenses Will Be Looked After

A . M . ALLAN January 15 1924

“CHOICE OF POLICIES” IS VERY IMPORTANT DECISION

BUSINESS & INVESTMENTS

There Is An Obligation to Arrange So That Your Debts and Funeral Expenses Will Be Looked After

A . M . ALLAN

THIS is the second of a series of six articles dealing with various phases of insurance. So many inquiries regarding life insurance reach the Financial Editor that it has been decided to provide fuller information in this manner. If further information is required in any insurance problems, a letter addressed to the Financial Editor, and containing a stamped, addressed envelope, will be answered personally. If of general interest, the letter will be replied to also in these columns. For mechanical reasons, replies published cannot be definitely promised in less than six weeks after the date of the inquiry.

THERE are two distinct classes of life insurance policies: Those in

the ordinary life plan that emphasize the protective aspect, and those in the endowment plan that emphasize the saving or investment aspect What type of insurance a person should buy will depend on individual circumstances. The program of each person will differ, just as his circumstances do, but in every case there should be a definite plan of insurance mapped out. And in order to reach the proper solution, study and forethought is necessary.

Life insurance is absolutely necessary for the protection of the average home. For other purposes, such as providing a college education for a child, or comforts for a widow, life insurance is desirable. For still other purposes, such as business insurance and succession duties, life insurance can be used advantageously.

When considering an insurance program, the following questions will naturally occur to the purchaser: “What am I trying to accomplish through life insurance?” “How am I going to fit life insurance into my financial program?” “What are my family needs?”

The first step in any life insurance program is, admittedly, a policy, payable in a lump sum to dependents, for the purpose of paying debts and funeral expenses. This is very important, both from the standpoint of the married and the unmarried man. Every man wants to feel that, when he dies, there will be sufficient money to meet his debts. The type of policy frequently selected to provide this fund is an Ordinary Life for about $2,000.

Providing for a Roof

\TTHEN a man has secured this VV amount of protection, he has only provided a fund sufficient to pay his debts. If he is married, he has still his wife and family to look after. They will need a roof over their heads, and sufficient funds for the necessities of life and for the education of the childrenThe next step in the insurance plan should be a policy sufficient to pay off the mortgage bn the present home, if any, or to provide for rent.

After protection has been provided against debts and funeral expenses, and a home has been secured for dependents, the next thing to consider is a policy that will, as far as possible, provide the necessaries of life for the insured’s family. For this purpose, a policy can be taken out that will be payable in a lump sum at the death of the insured, or one can be arranged to provide a monthly income for the beneficiary. The latter type of policy, that which provides a monthly income, is becoming increasingly popular. An income policy is designed to provide an income which will continue as long as needed. It is a similar type of

contract to any other insurance policy, with the essential difference that, instead of paying a lump sum, which may disappear through many causes, it pays a certain amount of money, at stipulated periods, for a certain guaranteed time. To obtain the largest possible income for the money they can spare, some men buy insurance on the ordinary life plan. Other men prefer for this purpose endowment insurance, so that the income not only provides an income for their wives in case of death, but also an income for themselves when they reach the age of sixty or sixty-five, the period when the average man’s earning capacity is greatly reduced.

Advantages of Endowment

IF A MAN has young children he may wish to make provision for their education at a college or university by means of a special policy. Endowment policies, maturing about the time the children will be ready for college, are usually chosen for this purpose. Some insurance companies have special endowment policies designed to afford a father an easy and convenient method of saving over a number of years the money necessary to give the child a college education.

Life insurance also offers an opportunity for the business or professional man to protect his estate against business reverses. Companies and partnerships can secure protection, by means of business insurance, against the withdrawal of capital or loss of credit through the death of an important member of the company or of a partner.

At first glance it might seem to the person with a moderate income that the plan here described is beyond his means. Such a man, earning, say, about $2,000 a year, can, in fact, buy insurance to pay his debts, provide for shelter for a reasonable time, and provide an income for his wife or other beneficiary.

It is generally accepted that the average man should devote about ten per cent, of his income to insurance. There are a number of cases, of course, on account of extraordinary circumstances, where ten per cent, cannot be set aside for insurance, but in the average case, ten per cent, is considered to be possible and advisable.

Practical Suggestions

THE following is suggested as an insurance program for a married man at age twenty-five, without children, and earning $2,000 a year. The rates are based on those of one of our well-known Canadian companies. Approximately 9Yi per cent, of the salary is taken as a basis. The actual sum required for this program is $191.70.

The first policy is an Ordinary Life, profit bearing, for $2,000, with a premium rate of $21.30 per thousand dollars. This policy will take care of all reasonable debts and funeral expenses. A profitbearing policy is suggested, because, if the man lives, and profits are allowed to accumulate, he will have a certain amount of paid-up insurance at age 45. This policy would cost him $42.60.

RE ARTICLE No. 1—One typographical error occurred in the insurance article in our last issue. In discussing, on page 5, a twenty pay life policy, nonparticipating, at age thirty-five, it ivas stated that, the premium, rate was $20.70 per $1,000; this should have read $28.70.

The next policy is to provide for shelter. For this purpose a Straight Life, profit bearing policy, for $3,500 is suggested. The premiums being on the same basis—presuming that the insurance is taken out at the same age—this policy would cost $74.55.

The third policy in the plan is one designed to provide a monthly income for the insured’s wife. This is again a Straight Life, profit bearing, for $3,500, with an annual premium of $74.55. The income from this policy would amount to approximately $35 a month, for one hundred and twenty months, or $25 a month for one hundred and eighty months, or $20 a month for two hundred and forty months.

Thirty-five dollars a month does not seem to be a very large income, but when one considers that the second policy in the program takes care of rent for a number of years, it would provide the necessities of life for one person.

This program is given merely to illustrate how an insurance plan can be worked out to suit an individual need. It is not suggested as being the best plan, but it is a possible solution of this individual insurance problem.