( Originally Published 1918 )
Definitions. Terms Employed.—Insurance is a contract (called a policy) by which one of the parties, called the insurer, binds himself to the other, called the insured, to pay him a sum of money or otherwise indemnify him in case of the happening of a fortuitous event, provided for in a general or special manner in the contract, in consideration of a certain sum of money called a premium, which the latter pays or binds himself to pay him. Failure to pay a premium when it is due will forfeit the policy unless the insurer consents to an extension of the time for payment, or accepts notes in payment. Application for an ex-tension of time should be made in writing and a copy kept. The letter should be mailed with re-turn postage inclosed. The letter and its answer (if favorable) will protect the insured.
Agents.—In nearly all cases, insurance is effected through agents. These are of two kinds : An agent employed and paid by an insurance company is the company's agent, and within certain limitations has power to bind the company by his agreements. An agent who solicits insurance from any company is your agent, acting as a broker.
Kinds of Insurance: Insurance is generally divided into three principal kinds: fire, marine, and life-but in addition to these, other forms have come into use, as accident, burglary, rent, automobile, tornado, hail, plate glass, boiler, fidelity, live stock, burial, title, credit, and liability insurance, as well as many special forms.
Fire Insurance includes all undertakings to indemnify the insured in case of loss by fire, whether upon buildings, ships, or the goods and stock contained therein, or live stock.
What Property May Be Insured.—Every kind of property may become the subject of insurance, unless, from motives of public policy, it has been prohibited by law. Insurances are most commonly made on buildings, goods, merchandise, freight, bottomry, loans, profits and commissions.
Who May Insure.-A person in order to secure a valid policy must have an interest in the property insured. It is not necessary, however, that a person should be the owner of the whole or a part of the property in order to enable him to effect an insurance thereon. It is` sufficient if he is directly interested in its safety. A person, therefore, has an insurable interest in any property when he is so circumstanced with respect to it, that its loss will be prejudicial to him.
Increasing Risk.—The amount of premium is based upon the degree of danger there is of fire. The insured must, therefore, not increase the risk; if he does the policy becomes void. No change should be made without notifying the insurance company and obtaining its consent.
Changes made after the policy is issued, for which the insured is not responsible, will not affect the contract.
Conditions in the Policy. All policies contain certain conditional agreements, such as: that no gunpowder or gasoline shall be kept on the premises insured; that they shall not become vacant, or that if any other insurance is added the company be notified.
Misrepresentation on the part of the owner as to the character of the property or the danger to which it may be exposed make the policy void.
Negligence.—A fire caused by negligence does not exempt the company from paying the loss, unless the negligence is so great as to be criminal or to indicate fraud.
Proof of Loss.—In order to recover amount of insurance the insured, after the loss of property by fire, must prove the quantity and value of the goods so lost, and also the injury sustained on goods not burned by reason of water used in at-tempting to extinguish the fire, and must make such affidavits and produce such certificates as the terms of the policy require, and cause the same to be filed in the office of the company with-in the time specified in the policy of insurance.
But with some companies and in some states the full insurance will not be paid unless the insurance is of a certain fixed proportionate amount of the value of the property insured. For in-stance, if goods or property valued at $10,000 are insured for only $5,000 and there is a partial loss, say, of $6,000, the full $5,000 insurance will not be paid but only a -proportionate amount thereof.
Amount Paid.—The amount to be paid in fire insurance is the amount of the loss, unless the loss exceeds the amount of the policy. The company never pays more than the policy. Thus if the policy is for $3,000 and the loss is $300, it pays $300 and the policy becomes $2,700. If the policy is $5,000 and the loss $6,000, the company pays only the $5,000 and the policy is discharged.
Valuation is sometimes made in policies upon chattels of uncertain value, as books, plate, or works of art, and if a loss happens the insured is entitled only to actual indemnity.
Rebuilding.—Insurers against fire usually stipulate that they may rebuild or repair the premises insured, if they prefer, and they frequently avail themselves of the right.
Transfer of Policy.—A policy of insurance is not negotiable ; yet if it is transferred for value in good faith, the transfer may be so far valid as to give the assignee a right to sue, subject to any equitable defense which could be made against the insured.
The insurance policy does not go with the property when sold, but must be conveyed separately with the consent of the company. The assent of the insurance company in writing should be appended after any change in the ownership of the policy.
Note. —A policy of insurance against fire covers only that which it expressly specifies. Every-thing that is to be insured should be put in writing and included in the policy. Too much care cannot be taken in filling out the answers to questions in any schedule of particulars that ac-companies or is a part of the application for insurance. False representations or "wrong answers" will invalidate the policy.
Property damaged by fire should be left un-touched until the adjuster inspects it, unless there is danger that the damage will be increased (as in the case of goods), when it should be moved to a safer place. It is the duty of the insured to keep loss down to the lowest figure possible.
In scheduling values, state every value in full. After a fire it would be difficult if not impossible to raise values.
Fire Insurance Policy—The Main Clause
No. 420,745. $5,000.
The Hartford Fire Insurance Company, of Hartford,
In consideration of forty dollars, do insure Chas. A. Barrows against loss or damage by fire to the amount of five thousand dollars as follows :
On certain books, engravings, steel and copper plates, and other merchandise now contained in the building at No. 425 Lincoln Street, Boston.
And the said company hereby agree to make good unto the assured, his executors, administrators, and assigns, all such immediate loss or damage (not exceeding in amount the sum insured) as shall happen by fire to the property above specified, from the 15th day of January, 19 , at noon, to the 15th day of January, 19 , at noon, the amount of such loss and damage to be proven and paid, or made good according to the following terms and conditions :
(Here follow ordinarily a large number of additional clauses.)
In witness whereof we have caused this policy to be at-tested by the president and secretary of the company the loth day of January, 19 .
WM. R. STANFORD, WALTER E. CLARKE,
Renewal of Fire Insurance
Hartford, Conn., January 15, I9--.
The Hartford Insurance Company,
Do insure Chas. A. Barrows, in consideration of forty dollars, being the premium on five thousand dollars; this being a renewal of policy No. 420745, which is hereby continued in force for one year, to wit, from January 15, 19-, to January 15, 19-, at noon.
WILLIAM R. STANFORD, WALTER E. CLARKE,
Assignment of Policy
Know All Men by These Presents, That I, the within named Chas. A. Barrows, for and in consideration of the sum of Fifty Dollars, to me paid by Charles Dana, of Boston (the receipt whereof is hereby acknowledged), have granted, sold, assigned, transferred, and set over, and by these presents I do absolutely grant, sell, assign, transfer, and set over to him, the said Charles Dana, all my right, property, interest, claim and demand in and to the within policy of insurance, which have already arisen, or which may hereafter arise thereon, with full power to use my name so far as may be necessary to enable him fully to avail himself of the interest herein assigned, or hereby intended to be assigned. The conveyance herein made, and the powers hereby given, are for myself and my legal representatives to said Charles Dana and his legal representatives.
In testimony whereof, I have hereunto set my hand and seal, this — day of —, A. D. I9—.
CHARLES A. BARROWS. [SEAL] Executed and delivered in the presence of WILLIAM SPENCER.
We hereby approve of the above assignment. (Signed) John Jones, Secretary, New Hartford Ins. Co.
Marine Insurance is a contract to pay the owner of a ship and cargo certain portions of his loss, if it is damaged or destroyed while at sea.
The Premium is often paid by a series of notes called premium notes. The policy is valid whether the notes are paid or not.
The Amount of the policy may be any fixed sum, namely, the loss the company shall be responsible for. The amount to be paid is that proportion of the loss which the amount of the policy bears to the value of the property. Hence the company does not pay the whole of the loss unless the policy equals the value of the property.
If property is insured to only half its value the company pays only one-half the loss.
If policies have been obtained in several companies each company pays its proportion of the loss in the same proportion as though it were the only company.
A Time Policy is one framed to cover possible loss within a specified time. This may be a year or certain months of a year. Other policies cover only the risk in a certain voyage.
When the insurance is for a certain voyage; the place of sailing and that which is to be the termination of the voyage must be specified, and the voyage must be by the ordinary course from one port to the other unless deviation is allowed by the terms of the policy. If the vessel does not enter upon the contemplated voyage the premium need not be paid, and if paid must be returned.
Risk Assumed.-The risk provided against is not only that of fire, but also the other extraordinary perils attending a sea voyage, such as the perils of the sea, piracy, general average and salvage. General average is the loss of goods occasioned by throwing overboard a part of the cargo in order to save the vessel during a storm. Salvage is a compensation seamen obtain for saving property they find abandoned or helpless at sea.
Ownership.—Since goods are often sold after being insured, the consent of the company should be secured to make the insurance valid. This may be obviated by making the policy "for the benefit of whom it may concern at the time of the loss." Then the policy remains in force no matter who owns the goods.
Valued Policy.—The place for the valuation of the property is sometimes left blank. In that case the value must be determined at the time of the loss. But often the value is inserted; then that value is controlling for both parties. It is then called a valued policy. If in that policy the goods are valued at $500 and the loss is $250, the company pays only $250. If the loss had been $500 the company would have paid the whole loss. A full insurance is when value of property and value of policy are equal.
Seaworthiness.-It is taken for granted that a vessel to be insured is seaworthy. The person insured, not the company, must take the risk. If the vessel proves to be not seaworthy the insurance is void, though both the insured and insurers were not aware of it.
Lost or Not Lost.—These words in a policy have reference to the insurance of property on sea when neither the owner nor the company knows whether it is already lost or not. The company take the risk, also, and will pay the loss at the time the contract is made.
Abandonment. If property is wholly lost the company pays the whole amount of its policy. If the partial loss be less than half the value of the property the company pays its due proportion of the loss. But if the loss is partial, but amounts to more than half the property in value, its owner has the right to give up to the company what re-mains, and claim the full amount of the policy. This is called the right of abandonment. If the words "without right of abandonment" are in the policy the company can refuse to take the property.
Caution.—It is necessary to be careful in noting just what dangers are insured against by a marine insurance policy. This is especially necessary during a time of war. The Lloyds' ordinary policy expressly releases the insurer from dangers arising from war, so that a special arrangement must be made canceling that re-lease if an owner desires to insure his property against war chances.
Life Insurance is a contract to pay a certain amount of money at the death of a certain person, or when he reaches a certain age. Life insurance is not based, as most people suppose, upon the life of an individual. It is rather the act of insuring the productive ability of an individual, on the basis of the accumulation of wealth that would accrue to him if he were to live his expiration of life. Life itself is not insured—it is the ability and genius of the insured on which the risk is placed.
A Whole-Life Policy (participating) is a constant and steady source of thrift during life. This policy is the simplest form of life insurance. Premiums are payable during life, and the amount insured is payable at death. It is life insurance reduced to its plainest and least expensive form. It will largely increase your estate at death for a relatively small outlay.
The policy contains the entire contract. Every agreement and provision is definitely stated. Of the policies of reliable companies 90 per cent of insurance is written on the whole-life plan.
Limited-Payment Life.—The amount of insurance is payable only at death and premiums are payable for a selected period of ten, fifteen, twenty, etc., years or until death, if it occur within this period.
An Endowment Policy is an agreement to pay a certain sum to the insured at the end of a fixed term, or to his representatives at his death, should that occur before the end of the term. Premiums are usually payable during the entire period, but may be limited to a shorter term of years than the endowment period.
Convertible Term Insurance.-This policy insures against death within a certain term of years and is designed as a protection for business partners during the development of their business. A term policy is based on actual risk for only a short period of years and may be converted into any other regular form of policy without medical re-examination within a stated period. Usually the maximum insurance on one life is $25,000 and the minimum $5,000.
Monthly Income Policies are issued on any of the above plans and the insurance made payable in monthly installments from $10 up, or with a stated amount at death for expenses and the balance in monthly installments. This is an ideal form of insurance, as it gives protection to the widow and releases her from the responsibility of investing a large sum of money and the danger of losing what has been provided for her.
Principles Governing.—Life insurance is governed by the same legal principles, as far as they are applicable, as other kinds of insurance. Fraud or deceit in obtaining a policy will render it void during the first and second year. After that the company has no standing in court, regardless of fraud that may have been practiced in getting the policy.
Insurable Interest.—Any person can insure the life of another upon whom he or she is dependent for support, or in the continuance of whose life he or she has an adequate pecuniary interest, and a wife is always held to have an insurable interest in the life of her husband.
The consent of the person whose life is insured must be obtained to a policy issued in favor of a third party.
If there is no insurable interest the contract is void, as being a wager policy.
A creditor may insure the life of his debtor for the protection of his debt.
Restrictions.—There are no restrictions as to residence, occupation or travel, after a policy is issued. The application for insurance sets forth certain requirements. These are made in reference to travel or occupation and if not acceptable to the company, the applicant is rejected. When once a policy is accepted, there is no restriction as to travel or occupation.
Disability Clause in Outstanding Policies.—Companies today are inserting what is known as a disability clause. This protects an insured from financial distress in case of his total disability from accident or disease, the company waiving the premiums on account of total disability, and in addition maturing the policy to the insured as an endowment.
Life Insurance in War Conditions.-In April, 1917, eleven of the leading life insurance companies made new rates on policies that contain war clauses. In most cases no increase of premiums is asked for military service in the continental United States, but for service abroad all payments are suspended unless or until the holders agree to pay increased premiums up to 10 per cent of the face value of their policies. But this situation is somewhat relieved by government, as outlined in the paragraph next following this one:
SOLDIERS' AND SAILORS' INSURANCE
By an act of Congress approved October 6, 1917, persons in the active military and naval service of the United States are given the right to take out life insurance with the government. This act is being administered by the Secretary of the Treasury through the Bureau of War Risk Insurance of the Treasury Department.
The time within which a soldier or sailor may apply for government insurance is strictly limited to 120 days after enlistment. Insurance up to $10,000 may be taken.
The government issues compensation for death or injuries or disease suffered in the line of duty. But the compensation and the insurance are independent of each other. The insurance is an addition to these compensations, and does not in any way affect them; nor does it affect the right to either service or retirement pay.
Thus the compensations and the right to service or retirement pay are established benefits that go with the service. But insurance is optional with the individual soldier or sailor.
Who Can Be Insured.—Enlisted persons in active service under the War Department or the Navy Department can be insured. For insurance purposes they are officially listed thus : "Any per-son, male or female, enlisted, enrolled, or drafted into active service of the United States, including non-commissioned and petty officers and members of training camps authorized by law; members of the Army Nurse Corps (female) and members of the Navy Nurse Corps (female)." (See Revised Act page 444.)
Insurance Benefits.—$5.75 a month for each $1,000 of insurance, payable in the event of total and permanent disability as long as the insured lives and is so disabled.
In case of his death, $5.75 a month on each $1,000 of insurance will be paid for 240 months (20 years) to his beneficiary, less any payment made to the insured for total and permanent disability. The total insurance will not be paid in a lump sum in any case, but only in monthly installments.
In cases of injury or illness occurring after the insured has left the service, the benefits will be paid provided the insured has kept his premiums paid up. Thus if the policy be taken out while the insured is in service, it operates the same as any other straight insurance after he leaves the service, until five years after the close of the war, when it must be changed to another form.
Premium payments have 31 days of grace after the date on which they fall due. During those 31 days the insurance will remain in full force and effect. Should the insurance lapse through non-payment of premiums, it can be reinstated within six months by compliance with the regulations of the Bureau.
Premiums vary from 64 cents a month on each $1,000 for a man of 18, to 82 cents a month for a man of 45. The rate increases very slightly with the age of the insured.
Premiums may be paid by deductions from pay; by deduction from any deposit with the government; by direct payment to the Bureau by the insured or by someone for the insured. The government recommends payment by deduction from pay as being the best protection to the insured or his beneficiaries. There is no chance that payments in this manner can miscarry.
All expense of handling the insurance will be paid by the government. Losses in excess of premiums will be borne by the government.
Military insurance cannot be attached, assigned, or otherwise taken by creditors.
Beneficiaries are classed as follows: Wife, husband, child, grandchild, brother, sister, adopted brother, adopted sister, step-brother, step-sister, parent, grandparent or step-parent of the insured, and parent, grandparent, or step-parent of the insured's wife or husband. Only those in this permitted class may be named as beneficiaries.
OTHER FORMS OF INSURANCE
Fraternal Insurance is probably the oldest of all forms of insurance, having originated in certain ancient secret societies, being at first nothing more than an obligation assumed by the societies to pay sick and death benefits to their members. But of late years many substantial fraternal societies have come into existence for the express purpose of insurance, the money for death payment being raised by assessments, the assessment rates either remaining stationary or increasing with the age of the member. Some of the fraternal societies in which the lodge principle prevails insure the payment of a stipulated sum on the death of a member, and assessments are made on the death ratio. Among the largest of these organizations in the United States are the Odd Fellows, with a membership of over 1,500,000; the Modern Woodmen of America, with a membership of 960,000, and Knights of Pythias, with a membership of nearly 760,000.
Industrial Insurance does not differ essentially from ordinary life insurance, except that it usually is for a small amount, the payments on the premiums being made every week. It is mostly taken out by those who cannot afford an ordinary life policy, and chiefly for the purpose of providing a burial fund for children and infants.
Accident Insurance, as applied to the death or injury of persons, usually provides for a stipulated sum to be paid on the death by accident of the insured and a specific indemnity for the loss of one or both eyes, one or both hands, or one or both feet, while the addition of about one-fifth to the ordinary premium rate double indemnity is promised for death or disabling injury while riding upon railways and other public conveyances. Some companies stipulate to pay, besides the usual indemnity in case of accidental death, a weekly benefit for a partially disabling accident.
Casualty Insurance covers losses by fortuitous happenings in many kinds of business. There are companies which insure against elevator accidents, breakage of plate glass, loss through dishonest employees, liability of employers for accidents to those in their employ, accidents to steam boilers, etc.
Health Insurance is against sickness. The policies usually have a list of diseases in which weekly indemnity is allowed. Health insurance is in some cases not allowed issued except in connection with accident insurance. In some fraternal societies sick benefits are paid to members, which amounts to pretty much the same thing as health insurance.
Group Insurance is a form in which the employees of any employer can participate in a blanket policy issued to the employer. No medical examination is required. The employer pays the premiums monthly. The insurance is payable to the beneficiary named by the employee. This insurance is usually on the basis of one year's pay of any individual employee, with a maximum of $3,000. An employee's salary might be in excess of $3,000, but that would be all his beneficiary would get.
At the employer's request, the insurance company will pay the insurance money in twelve monthly installments, which would be equal to a continuance of the monthly pay check for one year after the death of the insured.
Incoming employees are included in the insurance upon a simple health test. Outgoing employees automatically drop out of it.
The annual cost of group insurance is between 1 and 1 1/2 per cent of the annual pay roll.
Liability Insurance is that which protects an employer from liability arising under the employers' liability or workmen's compensation laws. Railway companies may in some states be insured against liability for injuries to passengers.
Strike Insurance enables an employer to be insured against loss by strikes on the part of his employees.
Burglary Insurance protects the insured against loss through theft committed by a burglar. It does not cover other forms of theft.
Burial Insurance is a form under which in consideration of a sum paid weekly or monthly the company agrees to pay for a decent burial.
Fidelity Insurance is a protection against loss through dishonesty of agents.
Automobile Insurance is one of the newest forms. It insures against fire or explosion, theft, damage by fire to personal effects carried in the machine, damage by collision, damage to other property by collision with the insured machine, injury to or loss of life by passengers in the machine, or legal liability for expenses connected with such cases ; and the same in case of injury to or loss of life by others. The premiums in automobile insurance are very high, because the risks are very great everybody knows why.
Boiler Insurance is to compensate damage to property through boiler explosions resulting from causes other than fire. Explosions caused by fire are covered by fire insurance.
Title Insurance is issued by title companies or title and trust companies, as against possible flaws in real estate titles. It is usually demanded by purchasers of realty. It binds the insuring company to settle, or to defend and protect the purchaser in any suit on title of which he has been served with notice or to indemnify up to a sum agreed upon.
Other Forms of Insurance, as Plate Glass, Hail, Tornado, and the like, are sufficiently de-fined by their titles.
Commercial Men's Accident Insurance.—This is a system of insurance carried on by associations of commercial travelers at actual cost. The Illinois Commercial Men's Association and the Commercial Travelers' Association of America typify the system thoroughly, and so may be taken as describing it.
The requisites of membership are thus set forth in the literature of the associations:
"Any white male person of good moral character and good general health, and between the ages of eighteen and fifty-five years, who, at the date of his application for membership, is engaged as a traveling salesman in selling some kind of goods, wares or merchandise at wholesale, or as a traveling buyer for a wholesale house, jobber or manufacturer (except persons traveling as purchasing agents in cities or suburban towns for the retail or consuming trade), traveling auditor, traveling adjuster, traveling freight agent, traveling passenger agent, or as a traveling collector or traveling solicitor for a wholesale house or manufacturer, and provided he is not also engaged in any other business more hazardous than those named, is eligible to membership in this association."
The membership fee is $2.
The benefits are : $25 weekly indemnity for 104 weeks; $5,000 in case of accidental death; $5,000 in case of accidental loss of both hands or both feet; $5,000 in case of accidental loss of both eyes; $5,000 in case of accidental loss of one en-tire hand and one entire foot; $2,500 in case of accidental loss of one entire hand or one entire foot ; $1,250 in case of accidental loss of one eye ; $10,000 in case of accidental death while riding as a passenger in a passenger car of a passenger train propelled by steam, or while such a train is being operated by electricity at terminals or through tunnels.
The cost of each member's insurance in this association is about $8 a year. The losses and operating costs are paid by dues or assessments. All the money thus paid in goes to these purposes. There is no profit in it for anyone. It has no agents and pays no commissions.
Returned Soldiers' Insurance Act.—By a special act, policies may be issued to Aug. 31, 1929, to any person honorably discharged from service in the world war in amounts from $500 to $5,000.