29

RATE-MAKING ONE-YEAR TERM OR -NATURAL PREMIUM.

The method of insuring lives which naturally first suggests itself because of its simplicity is to give insurance from the date of the payment of one premium to the date when another premium becomes due, charging premiums just sufficient to cover the current cost of the protection. Thus, if premiums are parable annually, this will be an insurance for the term of one year, renewable, if at all, by the payment of a premium varying with the risk as the age increases, each rear taking care of itself.

Of course, the liability to die does not remain the same on the ayerage throughout each year of age, but must be conceived as constantly varying in a regular manner. Thus from birth to age 10, for instance, it constantly diminishes, though at a diminishing ratio, and then begins to increase very slowly at first, but thereafter increases at a constantly increasing ratio. But the custom in life insurance, though not without exceptions, is to deal with the deaths as occurring uniformly throughout the rear, and as then changing, so as to occur uniformly throughout another year. This involwes no material error when premiums are paid annually; and at age to and above the error is also not material when premiums are paid at interwals of less than one Near because, as the risk is actually increasing, to charge a pro rata part of an annual premium, representing the risk of the entire year, gives more than cur-