Whole Life Policy

This is the commonest and fundamental form, from which all others are derived. It provides for a fixed annual payment throughout the life of the insured, in return for which the company agrees to pay the face value of the policy upon the death of the insured to any beneficiary he may have designated.

Limited Payment Policy. Premiums are paid for only a limited number of years, although the company will pay the face value of the policy to the beneficiary whenever the insured person dies, no matter how long after the policy becomes paid up. Of course it costs more than the above. Endowment Policy. Premiums are paid for a specified number of years, fifteen, twenty, twenty-five, etc., at the end of which time the face value is paid back to the insured and if he dies any time before the specified period elapses the face value is paid to his beneficiary.

Term Policy

For a very low rate insurance can be obtained for a limited term of years, five or ten. This is temporary insurance. At the end of five or ten years, the insurance can be renewed only at a much higher rate.

The term policy is a good temporary expedient or makeshift because you can get more insurance for the same amount of money than in any other way. But it has no permanent value and has many drawbacks. I advise against it, except perhaps for business men of large means who wish to insure their business affairs rather than their families.

Endowment Policies

Endowment Policies also should be avoided, unless that is the only way a man can save money. There are persons so constituted that only the compulsion of life-insurance will force them to save anything. Most endowment insurance is very expensive. Long-time endowments, say for forty years, however, do not have these disadvantages.

As between the twenty or thirty payment life and whole life it is hard to choose; but, on the whole, I think the straight or whole life is better. It is urged in favor of limited payment life, that it enforces the payment of insurance premiums during the period of greatest earning capacity, and provides fully paid up protection by the time the insured is forty-five or fifty years old, when the expense of a growing family is perhaps the heaviest, and after which his earning power may be expected to grow less. This policy confines the burden to the young, healthy, and productive period of a man's life. And it is urged against the whole life policy that a man has to pay in the declining years of his life when insurance is not so much needed, and when he may be unable to pay because of smaller earning power. Of course much depends upon one's occupation.

These arguments are in many cases really beside the point. The supreme advantage of whole life insurance is that you get more insurance - that is, more protection - for the money than in any other permanent form. It gives the most immediate protection, which is exactly what a young man wants, because when he is young his children are so small as to be utterly helpless. For seventy-five dollars a year a man of twenty-five can get at least five hundred dollars more insurance in whole life than by any other permanent plan. It is therefore desirable for the young man who has little if any other money to invest, and must devote all his available means for protecting his wife and young children.

The impression that one must pay premiums throughout life on a whole life policy is wrong. At any time a whole life policy can be changed over into a limited payment policy by increasing the premium; that is, it can be paid up. Many life-insurance policies pay dividends that tend to increase for a number of years, and the dividend can be used toward paying up the policy. These dividends, if left with the company, usually do actually pay up a policy in twenty-five or twenty-six years. Finally, as already explained, every insurance policy has a cash surrender value which grows larger as time goes on. Thus, if one has a whole life policy for, say, twenty years, after which the children have grown up and insurance is no longer needed, the policy can be surrendered for cash with practically no loss. Meanwhile the family has had the most protection, which is what insurance is for.

For young men with families, and without private means, whole life or forty-year endowment is probably best.