200 BUSINESS OF LIFE INSURANCE

twentieth annual premium has been paid, and there is paid to the beneficiary only $1,000, the face of the policy, there is a loss, instead of a gain, because of the transaction.

The loss is sometimes guarded against by adding a return premium or partial return premium feature, of course increasing the premium to cover this. In consequence, if death occurs during the twentieth year, in addition to paying the principal sum to the beneficiary, the company also pays an amount equal to all the premiums received or one-half or one-third of the premiums received, as the case may be.

Another sort of modification which does not really make the insurance a new kind, is when a proportion of each premium is not paid in cash but is charged against the policy as a loan. This gives a lower cash premium, of course. The plan is very old, being in fact the guise under which life insurance by mutual companies first became popular in the United States. It was attended by two features which made the results unsatisfactory, viz., an interest charge far in excess of the rate used by the company in computing its premiums and reserves, and an estimate that annual dividends would wipe out the loans, which estimate was not realised. The result was increasing cash cost because of the interest, and decreasing insurance because of the loans. Not-withstanding which objections, the plan was