Insurance premium

“ Lower or eliminate health insurance premiums for millions of lower- and middle-income families enrolled in health insurance marketplaces. A family of four making $90,000 could see their monthly premium come down by $200 per month. ”

“ The theory of a mutual insurance company is, that the premiums paid by each member for the insurance of his property constitute a common fund, devoted to the payment of any losses that may occur. Now, the cash premium may as well represent the insured in the common fund as the premium note; and this class of companies has been so long engaged in the business of insurance, it may well be that they can determine, with sufficient certainty for all practical purposes, the just difference in the rates of premium between cash and notes. ”

“ But, on the contrary, when the dividends have been anticipated, as in the note system, by giving a note for part of the premium, the policy-holder insuring in this way, although he may at first receive a larger policy than he has the ability to pay for in cash, may lose the chief benefit of life insurance. For should he become unable, either by age, disease, or loss of property, to continue the payment of his premiums, his policy must lapse, because there is no accumulation of profits to his credit on which it can be continued. ”

“ There is no proper relation between the annual premium and the risk of assurance for the year in which it is paid. This idea of assurance from year to year is the suggestion of ingenious counsel. The annual premiums are an annuity, the present value of which is calculated to correspond with the present value of the amount assured, a reasonable percentage being added to the premiums to cover expenses and contingencies. ”

“ And if any person or persons shall insure his or their buildings or goods, and shall cause the same to be described in the policy otherwise than as they really are, so as the same be charged as a lower premium than would otherwise be demanded, such insurance shall be of no force. ”

“ The insurable value of the various properties of the company must amount to six or eight million dollars. The average rate on those properties would probably be about seventy-five cents per hundred dollars a year for insurance. That would make a premium of say fifty thousand dollars per annum. The commission to the insurance broker who handled that line—who could secure it and control it—would be ten per cent of fifty thousand, or five thousand dollars. ”

“ Each insured gets a contract of indemnity for the payment of a sum that will help cover the losses of others. Such an exchange is mutually beneficial. The premium comes from marginal income; the loss if it occurs would fall upon the parts of income having higher value to the insured. The less urgent needs of the present are sacrificed in order to protect the income that gratifies the more urgent needs of the future. In insurance each party gives a smaller value for a greater; each makes a gain. The greater security in business stimulates effort. ”

“ It is obvious, from the very terms of the rules, that cases may exist, in the same class of hazards, of very different degrees of risk, from the nature and qualities of the thing insured; and yet may not increase or diminish the premium. Whether the misdescription would have any effect upon the premium must, therefore, from the very nature of the inquiry, be a matter of fact upon all the circumstances of each particular case. ”

“ Washington Insurance Co., 4 Cow. (N. Y.) 645, the rule was applied in a case where the agent was authorized to make insurances, 'provided the office shall recognize the rate of premium, and be otherwise satisfied with the risk.' It was held that the company was bound to issue a policy where the insurance was a proper one and the premium was paid or tendered, although before the premium was received at the home office the property was consumed by fire. ”

“ And the average life policy becomes a claim thirty years after the first payment is made. Again, the company receives much larger amounts than the actual insurance cost. This peculiarity results from the fact, described in the first article, that men will not pay for their insurance as they go. They will not pay its actual cost this year, its actual cost next, and so on—on the natural premium plan, that is—but insist on paying the same amount each year—or a level premium. ”

“ The net value of the policy, when the premium becomes due, and is not paid, shall be computed * * * and after deducting from three-fourths of such net value, any notes or other evidence of indebtedness to the company, given on account of past premium payments on said policies, issued to the insured, which indebtedness shall be then canceled, the balance shall be taken as a net single premium for temporary insurance for the full amount written in the policy. ”

“ In determining the liabilities upon its contracts of insurance of any insurance company other than life insurance, and the amount such company should hold as a reserve for reinsurance, he shall, for casualty insurance companies, charge one half of the premium on all annual policies written within one year, and on policies written for more than one year he shall charge one half of the current year's premiums, plus the whole of the premiums for subsequent years. ”

“ Such is the form of the contract, and such is its character. It has been contended that the payment of each premium is the consideration for insurance during the next following year,-as in fire policies. But the position is untenable. It often happens that the assured pays the entire premium in advance, or in five, ten, or twenty annual instalments. ”

“ The official reports of Level-Premium Life Companies to the Insurance Departments of the several states show that these companies actually use, for expense of conducting the business, from $6 to $25 for each $1,000 of insurance outstanding. A man carrying $10,000 insurance for his family in these companies must pay on the average, for the expense of the business, about $80 per annum, and if it should be twice or three times that amount he has no redress. Should not these companies stipulate, in every policy, a sum for expenses which could not be exceeded? ”

“ When the sum insured is large, a higher premium per cent. is demanded; and money, papers, pictures, gunpowder, and jewels, are excluded.—If an article be falsely described, in order that it may be insured at a lower premium, the policy is justly void. An insurance made on the same subject at different offices, must be specified by indorsement on the policy; and, in case of loss, the offices pay a sum in proportion ”

“ If the insured amount substantially exceeds the value of the subject-matter of a insurance contract, the insurer or the policyholder may demand a reduction of the premium and of the insured amount: Provided, That the reduction of the premium shall be effective for the future. ”

“ Thus the expected losses of any year according to the table of mortality, divided by 1 + rate of yield on investments raised to the power of years distant, equals the present worth of insuring the entire group for that year. The sum of the discounted cost of insurance for all the years of the term divided by the number living at the beginning of the period, gives the single premium for each of the insured. ”

“ The object for which insurance exists is to guard against certain accidents to which we are all liable, such as the destruction of property by fire, or the loss of future earnings by disablement or death. An agreement is entered into by which one party, known as the insurer or assurer, agrees to pay to another, called the insured or assured, a certain sum in the event of the particular event insured against happening.
The document which states the conditions of this agreement is called the policy, and the payment made on account of the insurance is known as the premium. ”

“ The premium in personal insurance (life, accident, sickness, invalidity, old age pensions) is in almost all cases paid out of some current income. The premium paid is just so much subtracted from the amount available for present direct use and applied to the purchase of future incomes for one's self or family. ”

“ Inasmuch as the net premium for an abstainer at age 35, under an average distribution of endowment and whole-life policies, would be $3.03 per thousand of insurance in force less than for a non-abstainer, we have here a figure representing the actual saving on such lives, the net premium being comparable to the cost of manufacture in trade. ”

“ The statute fixes the premium which for life insurance must be based upon the American experience table of mortality, with additions for extra hazards, and with interest at three per cent, and with an addition for expenses and contingencies amounting to two dollars per year per thousand dollars of insurance and one-sixth of the value of the insurance distributed equally through the premium payments. ”

“ In these circumstances you will no doubt be persuaded of the desirability of sending me the premium forthwith, in order to effect an insurance which has your Lessors' approval. It possible that the office you name would give you credit for so much of is the premium as is proportionate to the risk unexpired. ”

“ For all that appears the insured may have been advised and may have assumed that the coverage clause of the policy gave protection in such a case as is here involved and may not have desired to continue to pay the additional premium for the other losses described. We are not called upon to speculate as to the state of mind of the insured's officers and one asserted ambiguity is not to be cured by another. If the general coverage clause permits recovery, we see nothing to defeat it in what was done in connection with the rider. ”

“ But, however instructive these details, it may be well, to avoid confusion, to sum up the whole process in the statement that the annual premium is a device to collect a larger amount than the death-rate in the earlier years of insurance, and to use these over-payments, improved at compound interest, to meet the deficiencies which arise in later years. The premium and reserve are so nicely adjusted that they are strictly equitable for the living as well as the dying at every year of life. ”

“ We therefore emphasize the proposition that a system of insurance that relieves the insurer of one half the pecuniary burden he is compelled to bear under the level premium system, is one that is worthy of fair treatment on the part of a discriminating public, and that the people cannot afford to have impeded in its usefulness by ignorance, prejudice, or moneyed monopolies. We repeat the claim for assessment insurance that it is natural as against artificial insurance. ”

“ As to instance, in a common insurance of 1000l. for seven years, the premium to be paid by the table will be 7l. from which 6d. in the pound per annum is to be deducted for the last six years, that is, 3s. and 6d. per annum, which amounts to 1l. 1s. and reduces the sum to be paid to 5l. 19s. and in the same proportion for any other sums or number of years; and persons insuring can never be subject to any calls or contributions to make good losses. ”

“ In life insurance, however, we have shown that the premiums contain a third element, namely, the portion that is set aside and accumulated to meet the risk of the insurance when the premium payable is no longer sufficient of itself for that purpose.
When a policyholder withdraws from his contract with a life insurance office, the provision made for the future in respect of his particular insurance is no longer required, and out of it a surrender value may be allowed him for giving up his right to the policy. ”

“ An employee may elect insurance under the policy by completing any form of pay roll deduction order approved by the employer. Each employee electing the insurance before becoming eligible will be insured automatically on the day he becomes eligible. On the effective date of the policy and on each annual renewal date an average annual premium rate will be established. The employer shall give the insurer notice of terminations of insurance and additions of employees becoming eligible. ”

“ They also try to prevent the lapsing of policies and sell new insurance when time allows. The company compensates the agents as agreed to in the 'Agent's Commission Plan' under which the agent retains 20% of his weekly premium collections on industrial insurance and 10% from holders of ordinary life, and 50% of the first year's premiums on new ordinary life insurance sold by him. The company plan also provides for bonuses and other fringe benefits for the debit agents, including a vacation-with-pay plan and participation in a group insurance and profit-sharing plan. ”

“ We have explained this great life insurance principle on the basis of the single premium—the payment down, in a lump sum in advance, of the entire cost of the life insurance—chiefly in the interest of simplicity. As s matter of fact, few buy their life insurance this way. They make to the common fund not one large contribution, but a smaller one each year, A considerable number pay this uniform sum throughout life. ”

“ The premium for insurance on houses and goods not{462} called hazardous was generally two shillings per cent. on any sum under £1000, half a crown on all sums between £1000 and £2000, and three and sixpence on all sums over £3000, so that a man insuring his house and furniture for £2500 would pay an annual premium of £4 7s. ”

“ But the business is yet in its infancy. The field of life insurance is not nearly covered, and if it were, ten million persons will come to maturity during the next ten years, all of whom may be considered as candidates for insurance, and all the policies will have to be renewed in a short time. Insurance agents receive as commission from ten to twenty-five per cent. Some companies secure to their agents a regular percentage on the premium so long as the policies continue in force. If, therefore, an agent gets fifteen per cent. ”