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INSURANCE. 496. Insurance is security guaranteed by one party to another, against loss, damage, or risk. It is of two kinds; insurance on property, and insurance on life.

497. The Insurer or Underwriter is the party taking the risk.

498. The Insured or Assured is the party protected. 499. The Policy is the written contract between the parties.

500. Premium is the sum paid for insurance. It is always a certain per cent of the sum insured, varying according to the degree or nature of risk assumed, and payable annually or at stated intervals.

Notes.--1. Insurance business is generally conducted by joint stock companies, though sometimes by individuals.

2. A Mutual Insurance company is one in which each person insured is entitled to a share in the profits of the concern.

3. The act of insuring is sometimes called taking a risk.

FIRE AND MARINE INSURANCE. 501. Insurance on property is of two kinds; Fire Insurance and Marine Insurance.

Fire Insurance is security against loss of property by fire.

Marine Insurance is security against the loss of vessel or cargo by the casualties of navigation.

502. The Sum Covered by insurance is the difference between the sum insured and the premium paid.

Notes.-1. As security against fraud, most insurance companies take risks at not more than two-thirds of the full value of the property insured.

2. When insured property suffers damage less than the amount of the policy, the insurers are required to pay only the estimated loss.

503. The calculations in insurance are based upon the following relations :

I. Premium is percentage (445).
II. The sum insured is the base of premium.
III. The sum covered by insurance is difference.

EXAMPLES FOR PRACTICE. 1. What premium must be paid for insuring my stock of goods to the amount of $5760 at 11 % ?

OPERATION.

OPERATION.

ANALYSIS. According to $5760 x .0125 = $72, Ans. Prob. I, (449), we multiply

$5760, the base of premium, by .0125, the rate, and obtain $72, the premium.

2. For what sum must a granary be insured at 2 % in order to cover the loss of the wheat, valued at $1617 ?

ANALYSIS. According to 1.00—.02 .98

Prob. V, (453), we divide the $1617 = .98 = $1650, Ans. . sum to be covered, $1617,

which is difference, by 1 minus the rate of premium, and obtain $1650, the base of premium, or the sum to be insured.

Proof. $1650 x .02= $33, premium ; $1650 – $33= $1617, the sum covered.

3. What must be paid for an insurance of $5860 at 11 % ? 4. What is the premium of $860 at $ %? Ans. $4.30.

5. What is the premium for an insurance of $3500 on my house and barn, at 11 %?

Ans. $43.75. 6. A fishing craft, insured for $10000 at 21 %, was totally wrecked; how much of the loss was covered ? Ans. $9775.

7. A hotel valued at $10000 has been insured for $6000 at 11 %, $5.50 being charged for the policy and the survey of the premises; if it should be destroyed by fire, what loss would the owner suffer?

Ans. $4080.50. 8. A merchant whose stock in trade is worth $12000, gets the goods insured for of their value, at %; if in a conflagration he saves only $2000 of the stock, what actual loss will he sustain ?

9. If I take a risk of $36000 at 23%, and re-insure } of it at 3 %, what is my balance of the premium ? Ans. $360. 10. I

pay $12 for an insurance of $800; what is the rate of premium?

Ans. 1} %. 11. A trader got a shipment of 500 barrels of flour insured for 80 % of its cost, at 31 %, paying $107.25 premium; at what price per barrel did he purchase the flour? Ans. $8.25.

12. The Astor Insurance Company took a risk of $16000, for a premium of $280 ; what was the rate of insurance ? / 3

13. A whaling merchant gets his vessel insured for $20000 in the Gallatin Company, at %, and for $30000 in the Howard Company, at 1 %; what rate of premium does he pay on the whole insurance ?

7 Ans. } %. 14. If it cost $46.75 to insure a store for 1 of its value, at 14 %, what is the store worth ?

Ans. $6800. 15. For what sum must I get my library insured at 1} %, to cover a loss of $7910 ?

Ans. $8000. 16. What will be the premium for insuring at 23%, to cover $27320?

Ans. $680. 17. A shipment of pork was insured at 4f %, to cover of its value. The premium paid was $122.50; what was the pork worth?

Ans. $4480. 18. A gentleman obtained an insurance on his house for of its value, at 14 % annually. After paying 5 instalments of premium, the house was destroyed by fire, in consequence of which he suffered a loss of $2940; what was the value of the house?

Ans. $9600. 19. A man's property is insured at 21 % payable annually; in how many years will the premium equal the policy?

20. A company took a risk at 21 %, and re-insured z of it in another company at 23 %. The premium received exceeded the premium paid by $72. What was the amount of the risk ? ;

- 21. The Commercial Insurance Company issued a policy of insurance on an East India merchantman for å of the estimated value of ship and cargo, at 41 %, and immediately re-insured ; of the risk in the Manhattan Company, at 3 %. During the outward voyage the ship was wrecked, and the Manhattan Company lost $1350 more than the Commercial Company; what did the owners lose?

Ans. $40590.

LIFE INSURANCE.*

504. Life Insurance is a contract by which a company agrees to pay a certain sum of money on the death of an individual, to his heirs, or to himself if he survive a certain number of years, in

* This entire article was prepared by a Professional Actuary.

consideration of an annual premium to be paid during life or for a limited number of years.

505. The following are the principal kinds of policies issued by a Life Insurance Company:

1st. Life policies, payable at the death of the person insured, the annual premium to continue during life, called continued premium Sife policies.

2d. Life policies, payable at the death of the person insured, the annual premium to continue 10 years, 5 years, or only 1 year, called ten, five, or single payment life policies.

3d. Endowment policies, payable to the person insured, at the end of a certain number of years, as ten, fifteen, twenty, twentyfive, thirty or thirty-five, or to his heirs if he dies sooner. Annual premium to continue during the existence of the policy.

4th. Endowment policies, payable as the preceding, but the payments all to be made in one, five, or ten years.

506. The rates of premium for Life Insurance, as fixed by different Companies, are based on the probabilities of life, determined by a table of mortality, and the probable rates of interest which money will bear, and a loading or margin for expenses.

507. A Table of mortality shows how many persons out of a given number (as 10000), insuring at any age, may be expected to die the first, second, and third year, and so on until they are all dead.

508. The premium consists of three elements:

1st. Reserve, or that portion of each premium which must be kept and improved by interest (usually four per cent.), to pay the policy at its certain maturity.

2d. An estimated amount for each man's share of the annual losses of the Company.

3d. Loading, or a certain per cent. of the premium to meet current expenses.

509. Most Companies in this country are mutual, and divide the profits among the policy holders. The profits result from the Company realizing upon the reserved fund more than the assumed rate of interest, four per cent., and from the losses by death being less than was assumed in making the premium, and from the loading or margin being more than the expenses.

Dividends are declared at the end of the first second, third, or fourth year, and may be applied to reduce the annual premium or to increase the policy.

NOTES.—1. One-half of the premium is often paid by a note, and the dividends are afterward applied toward canceling the notes.

2. The following table rates have been selected for the different kinds of policies, for the reason that they are based on an American Table of Mortality.

3. Stock Companies make no dividends to policy holders, but generally charge a rate of premium 20 to 30 per cento less than the Mutual Companies.

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$19.89 20.40 20.93 .21.48 22.07 22.70 23.35 24.05 24.78 25.56 26.38 27.25 28.17 29.15 30.19 31.30 32.47 83.72 85.05 36.46 87.97 39.58 41.30 43.13 45.09 47.18 49.40 51.78 54.31 57.02 59.91 63.00 66.29 69.82 73.60 77.63 81.96 86.58 91.54 96.86 102.55

$42.56 43.37 44.22 45.10 46.02 46.97 47.98 49.02 50.10 51.22 52.40 53.63 51.91 56.24 57.63 59.09 60.60 62.19 63.84 65.57 67.37 69.26 71.25 73.32 75.49 77.77 80.14 82.63 85.22 87.94 90.79 93.78 96.91 100.21 103.69 107.35 111.23 115.32 119.66 124.28 129.18

$73.87

75.25 76.69 78.18 79.74 81.36 83.05 84.80 86.62 88.52 90.49 92.54 94.67 96.89 99.19 101.59 104.05 106.66 109.34 112.13 115.02 118.02 121.15 124.38 127.74 131.21 134.80 138.51 142.34 146.30 150.38 154.60 158.94 163,43 169.07 172.87 177.83 182.95 188.26 193.77 199.49

$326.58
332.58
838.83
345.31
352.05
859.05
366.33
373.89
381.73
389.88
398.34
407.11
416.21
425.64
435.42
445.55
456.04
466.89
478.11
489.71
501.69
514.04
526,78
539.88
553.33
567.13
581.24
595.66
610.36
625.33
640.54
655.99
671.64
687.48
703.49
719.65
735.92
752.26
768.67
785.10
801.52

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