NATURE OF LIFE INSURANCE 3

losses are expected to be met, not from the capital, but from the premiums.

In insurance, therefore, persons who, so far as they can themselves see or so far as the managers can discriminate, are equally liable to a given peril, contribute equally in proportion to the indemnity desired by each, small sums to a common fund from which those of their number who actually suffer loss in the given manner are indemnified.

For the individual, it is therefore a hedge, a counter wager, to cancel or offset the risks which nature compels him to take. It is the direct opposite of gambling, then, so far as the insured is concerned.

At first blush it may seem that it must be gambling for the company which for a premium assumes the risk for a consideration. This view, however, flows out of a wrong conception of the function of the company in the matter, which is really, in this regard, merely that of custodian of the premium fund. It will at once be seen that if the insured were to arrange for indemnity by means of a mutual fund, there would be no gambling about it at any point, by which it is not meant to say that the success of the scheme would be assured or that bad business management would not be able to defeat the purpose. But if the total losses that would take place among the insured were certainly