INSURANCE.

154. INSURANCE is a contract by which one person or party agrees, in consideration of a certain sum, to pay to another person or party a specified sum in case of a specified loss or damage to the latter's property within a given time.

NOTE. The contract may secure the payment of money in case of loss to property. This would be called PROPERTY INSURANCE. Or, the contract may secure the payment to some person named, of a certain sum, in case of the death of the person insured. This would be called LIFE INSURANCE.

155. An INSURANCE COMPANY is an association of persons for the purpose of taking risks on the loss of life or property. The company is called the INSURERS or UNDERWRITERS.

NOTE. Property Insurance Companies, as generally organized, limit their business to one or several of the following classes of risks: Loss or damage by fire (Fire Insurance), by a storm or other danger at sea (Marine Insurance), by transportation from place to place (Transit Insurance), and by breakage, etc., as of plate glass, etc. (Accident Insurance). Life Insurance Companies pay a specified sum at the death of the insured (Life Insurance), or a weekly sum in case of sickness (Health Insurance), or a certain amount in case of accident (Accident Insurance). Some companies do both a Property and a Life Insurance business.

156. Insurance companies are known, according to the way in which they are organized, as STOCK, MUTUAL, or MIXED. The larger number of insurance organizations are Stock Companies.

157. A STOCK INSURANCE COMPANY is one whose capital is owned by stockholders, who share the profits and are liable for the losses.

158. A MUTUAL INSURANCE COMPANY is one in which there are no stockholders, and in which the policy-holders (parties insured) share the profits and bear the losses.

159. A MIXED INSURANCE COMPANY is one in which the principles of the Stock and Mutual are combined. Usually the stockholders receive a specified dividend, and the balance of profit, if any, is shared by the policy-holders.

160. The POLICY is the written agreement between the insurers and the insured, and contains a description of the property, names the day and hour at which the risk begins and ceases, etc.

161. The PREMIUM is the sum paid for the insurance. It is computed at a certain per cent. on the insured value.

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NOTE 1. Sometimes the rate % of premium is expressed as so much per $100 of insurance. Thus, 50c. per $100, or simply 50c., which is understood to mean the same.

NOTE 2. The rate of premium depends on the amount and nature of the risk and the length of time for which the risk is taken.

FIRE INSURANCE.

162. FIRE INSURANCE is insurance against loss by fire. This insurance covers all loss caused by fire, as loss or damage by water or other means employed, to extinguish, or prevent, the spreading of the fire.

NOTE. Fire Insurance companies usually insure for less than the full value of the property. In such a case the owner is as much interested to avoid loss by fire as the underwriters themselves.

163. Owners of property may insure in one company only, or in several. In case of loss, when the insurance is placed with one company, an ordinary policy would give to the owner the amount of the loss, if not greater than the insurance. When the risk is placed with several companies, and the policies are all ordinary, each company pays that part of the loss which its risk is of the whole risk if such sum is not greater than its risk.

NOTE.

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- Most policies reserve the right to replace the loss or damage, instead of paying the insurance money.

164. Many policies contain what is known as an AVERAGE CLAUSE, which is to the effect that the liability of the company in case of partial loss shall be that part of the loss which the insured value is of the full value of the property.

Thus, a building is worth $12000, and is insured for $8000. The insurance is of the value. If the loss is $9000 the liability of the company is for of $9000, or $6000.

NOTE 1.- Fire insurance policies often contain a co-insurance clause to the effect that if the insured fails to keep his property insured for a certain per cent. of its value, the company will pay him only that proportion of the loss which the per cent. insured bears to the per cent. named in the policy. If the value of a piece of property is $20000, and the insured agrees to keep it insured for 80% of its value, or $16000, but fails to do so and carries only $12000 insurance, should a loss occur the company will pay only (12888) of the amount of the loss.

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NOTE 2. A FLOATING POLICY is one which covers goods stored in different places, and is generally taken out to cover goods which may be changed from place to place in the process of manufacture. Floating policies usually contain the average clause.

165.

SHORT RATES are rates for time less than a year.

Thus, a company may take a risk of $5000 for one yr. at 4%, or for G mos. at % (short rate). If the insurance is placed for 1 yr. the premium paid would be $37.50. If. at the end of 6 mos., the policy-holder cancel the policy, the company would retain enough of the $37.50 to equal 4% of $5000, and pay back to the policy-holder the balance, which is the difference between 3% of $5000, and 4% of $5000, or $12.50. If the policy were cancelled by the underwriters, the return premium would be such a part of the total premium as the unexpired time is of the full time.

MARINE INSURANCE.

166. MARINE INSURANCE is insurance against loss or damage to a certain vessel, or her cargo, or both, by storm or other danger of the sea, for a certain voyage or specified time.

NOTE 1.
NOTE 2.

Marine policies contain the average clause.
Consignments are usually insured at short rates.

167. SALVAGE is an allowance made to those rendering voluntary aid in saving vessels or other property from loss by fire or water.

168. An OPEN POLICY is one on which new entries may be made from time to time, as in the case of a vessel taking additional cargo.

NOTE. Such a policy is of value to importers and those who know that goods are sent them and do not know to what amount. As soon as the owner ascertains the amount he notifies the company, when the entry of the value of the goods is made on the policy or pass-book accompanying. Until such time the policy is supposed to cover the value of the goods and 10% additional.

RULE.

ORDINARY POLICY.

In cases of partial loss, the insurers will pay the whole amount of damage, except when this damage exceeds the insurance. In that case or in case of totul loss the insurers will only pay the full amount of the insurance. Companies dividing the insurance pay such part as their risks are of the total insurance.

AVERAGE CLAUSE.

RULE. In case of partial loss determine what fractional part of the value of the property is covered by the insurance. The insurers will pay only this same fractional part of the damage. If several companies divide the insurance, each will pay the same part of the loss as its insurance is of the total valuation. This rule applies to

all marine insurance.

PRACTICE.

169. 1. A store is insured for 2 yrs. for $6000 at % premium. What is the cost of insurance, $1.25 being allowed for the policy?

2. What is the premium paid for insuring a factory worth $8000, and its contents worth $3000, at $1.12?

3. A warehouse worth $45000 and its contents worth $20000 were insured as follows: Building for of its value at % premium, and the contents for of its value at 75c. What was the premium paid for insuring both?

4. A house worth $3000 is insured for of its value under an ordinary policy, for which the company received $1. The rate of premium is $1.25. If the house is damaged to the extent of $1200, what is the net loss to the company? What will be the loss if the house is destroyed?

5. A store and contents valued at $24000 are insured as follows: $9000 in the Hartford Insurance Co. at 3%; $5000 in the Ætna at 75c.; and $6000 in the Eagle at §%. The whole is damaged to the extent of $10000. How much of the loss shall each company pay? What is the net loss to each Co. ?

6. A factory worth $7000 and its contents are insured for $18000, as follows: $4500 on the building, $8000 on machinery worth $10000; and $5500 on stock worth $8000. The building is damaged to the extent of $3000, the machinery to the extent of $4500, and the stock is a total loss. How much is the claim against the company if the risk is covered by an "ordinary" policy? How much if the policy contains the "average clause"?

7. A building is insured in three companies for $15000, and is damaged by fire to the extent of $8000. What % of its risk should be paid by each company?

8. The contents of a store are insured for $3600 in several companies, and are damaged by water and otherwise, while extinguishing a fire, to the extent of $300. What % of its risk should be paid by each company? What is the loss of a company whose risk is $1500?

9. A dwelling-house is insured for $4500, as follows: $1500 in the Monarch Ins. Co.; $2000 in the Mass. Mutual; and $1000 in the Birmingham. A partial loss of $2400 is sustained by fire. How much ought each company to pay?

10. A cargo of goods worth $40000 is insured for $9000 in one insurance company, $8000 in another, $7000 in a third, and $8000 in a fourth. What insurance would the owners receive from each company if the cargo were damaged to the extent of $3200? What, if totally destroyed?

11. A vessel worth $50000 and her cargo worth $12000 are insured as follows: On the vessel $42000 and on the cargo $11200. The vessel encounters a storm, and is damaged to the extent of $9000, and $4000 worth of the cargo is lost. How much would be the liability of a company bearing the whole risk? How much is the liability of a company bearing a part risk of $20000 on the vessel and $6000 on the cargo?