Family Investment Talks
i -
"Every Man, Woman and Child Should Be Insured,” Says Bahsoi
By ROGER W. BABSON
Babson Park, Fla., Mar. 12—
Roger W. Babson, the famous
statistician, today continues his
“Family Investment Talks,” dis
cussing Life Insurance. As Mr.
Babson has no insurance of any
kind to sell and does not own
a share of stock or have any
other connection with any in
surance company, his words
should bear much weight. His
complete statement is as follows:
Insurance Uses Many
“Next to the preachers, doctors
and school teachers, probably no
persons do so much good—as
honest and competent insurance
salesmen. They provide for old
age, relieve suffering, and worry,
take care of widows and orphans,
educate children, support the dis
abled and do a host of other
good things. Were I a young
man and for any reason could
not be in the work I now am in, I
would sell life insurance. It is al
most the one thing that I would
feel justified in forcing on to all
whom I met, knowing, that some
day they would thank me. Hence
I must take this opportunity of
advising all to take out—not a
Life Investment Policy or a Life
Gambling Policy, but a Life
Insurance Policy—for every man,
woman and child should be in
sured.
‘ When I was a boy, the only1
life insurance sold was the whole
life policy, payable in cash at
death; but soon came the Pure
Endowment Policy and now we
have Limited Payment Policies,
Single Premium Policies, Combin
ed Life and Endowment Policies,
Joint Family Policies, Education
al Fund Policies, Business Insur
ance Policies, Group Insurance
Policies, Modified Life and Term
Policies, Monthly Income Policies,
Policies with Accidental Death
and Disability Benefits, and In
termediate Policies. All of this
means that placing insurance has
now become a profession and a
business man should go to an ex
perienced and honest man who
will analyze his needs. The man
on a salary may best take out a
twenty payment life; while the
stock exchange gambler should
take a single premium policy.
Men in humble circumstances,
who desire only protection, may
take a Monthly Income Policy
to protect the wife, and Limited
Payment Policy to insure the
children an education—while a
yet different form is advisable to
take care of instalment pur
chases, the mortgage on the home
and automobile, or to provide
against accident. Men of means
—on the other hand—desire busi
ness insurance, inheritance tax
insurance, bequest or payroll in
surance—all kinds have their
uses and all purposes are worthy
—but what kind is best for each
person is a question for expert
knowledge.
Insurance Benefits Have Grown
Fast
"No conservative Insurance
man will place all his earnings
into Life insurance which shows
that even the insurance agent
himself does not consider it the
best invesement at all times.
Even Life Insurance men—like
the rest of us—diversify their
earnings in Real Estate, Bonds
and other securities. On the
other hand they can honestly
say that Life Insurance is some
thing which everyone should
carry for one or many reasons.
Especially is it advisable as a
means of forced saving for those
who lack self-control or who have
families that are free spenders.
For such, Life Insurance is prob
ably one of the best ‘Invest
ments.’ It is also a good specu
lation because if you die before
your natural age of expectancy
your estate gets a higher rate of
interest than it could possibly
get in any other way with equa'
security. For instance, based oi
the average experience of mil
lions of people, a man 35 years
old should naturally live 31 years
9 months, 10 days, and upon this
expectancy the price of Insurance
is based. If the 35 year old man
lives to 66 years old, he gets
practically the same rate of in
terest that he would if he put his
money in the Savings Bank at
4 per cent. If he lives to a longer
age than 66, he gets a lower rate
of interest; but if he dies before
66 he gets a higher rate.
“The fact, however, that
science, civic effort, and improved
living conditions are tending for
longer life, works material bene
fits to all policy holders. This,
added to the fact that insurance
money is invested by the best ex
perts and is most carefully super
vised, makes it possible for the
insurance companies to do addi
tional things which are very at
tractive. Altho no Insurance
Company can beat the law of
averages, as to mortality, risk and
interest rates, yet it can do much
for the unfortunate minority who
die before their time, and especi
ally those who meet with ac
cident.
For instance, a man at 35 years
pays an average premium of
around $200 a year, for a $10,000
whole life policy and if he dies
at the end of the first year his
estate gets $10,000 on an invest
ment of only $200! If he cares
to make a contract with the com
pany that the premium shall be
ended at the end of 20 years
and yet have the Insurance re
main in force for his entire life,
the average net cash premiums
would be only about $250 a year.
With a somewhat higher premium
rate the payments will stop at
the end of 20 years, and, in the
case of a $10,000 policy, the
entire $10,000 will be paid to
the insured if he is alive, in
addition to giving him full in
surance in the meantime. This
form is called the Twenty Year
Endowment Policy. A feature
which many policies give is a
stated monthly income for life in
case of permanent disability; and
also, in the case of death, a fixed
monthly income to the estate
for a determined number of
years.
Borrowing On Policies
“Life insurance policies—ex
cept Term Policies—have cash
surrender, loan, and paid up
values; straight ‘Life’ after being
in force two years; ‘Endowments’
after two years; and ‘Single Pre
miums’ immediately. Of course,
some people are foolish and when
getting tired of paying premiums,
‘cash in’ or borrow on their
policies to buy something which
they very much want although
probably do not really need.
Usually it is a great mistake to
borrow on a policy unless it is
taken out for that sole purpose.
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The man who borrows on his life
insurance policy is borrowing
from his widow and children,
and if it is his bnly insurance
policy, he is doing very wrong.
Of course, policies which are
taken out purely to get credit for
an education or start in business
—and not for the family’s pro
tection —may rightly be used
for collateral. In fact this is a
field for credit which has not
begun to be appreciated; but in
such cases the policies used for
collateral with the bank or pri-!
vate parties should be additional
policies taken out for that specific
purpose. Policies taken out to
protect the family should be kept
sacred—never allowed to lapse
and never borrowed upon except
in cases of extreme necessity.
“This, however, does not mean
that insurance companies should
be used only to pay money into!
Insurance companies are as
anxious to loan their funds safely
as to collect premiums. These
companies loan money as do
banks. Business men should be
as free to go to them as to a
bank. Some of the companies
are now making special proposi
tions to both farmers and home
builders to loan money on the :
partial payment plan. In certain
sections of the west the insurance
companies are keen competitors :
of the Federal Farm Loan Banks, i
the Joint Stock Banks, the Build- i
ing and Loan Associations and <
the Co-operative Banks, there- i
fore before borrowing money to ]
build it is always wise to see your ]
insurance agent and have him put i
you in touch with the proper i
parties who handle the building <
loans of the companies which :
he represents. This is an i
additional reason why it is ad- ’
visable to get life insurance 1
through an established and com- 1
petent agent who can be as use- i
ful to his clients in securing i
funds as in selecting for them the 1
right kind of insurance. Life i
insurance should no longer be
looked upon as a mere ‘duty’ i
which one owes to his family.
It is the backbone of a great in
dustry and should be capitalized
and used as a business and in
a business way.
Insurance and National Progress
“Not only is life insurance a
great boon to individuals, but it
has become a great factor in
financing industry and National
progress. Our railroad systems,
great industries, and public utili
ties are financed largely by the
insurance companies. The insur
ance companies were the greatest
buyers of Liberty Bonds during
the war and are now probably
among the largest holders of our
National debt. The development
of the farms of the central west
and south have been largely
financed by the insurance com
panies. The first mortgage on
nearly every large office building,
hotel or apartment house is held
by some insurance company while
now, as above mentioned, the
more progressive companies are
maxing special arrangements tor
;he loaning of money for the
juilding of small homes. This
neans that when paying money
nto an insurance company we
tot only protect our family, and
nake a fair investment with a
rery good gamble attached; but
ve render a good service in help
ng to build up the country’s
igriculture, railroads, cities, pub
ic utilities and industry in gen
ial. Some of the companies
ire now establishing the excellent
iractice of loaning back to the
>eople of each state an amount
ipproximate to the premiums
eceived from said state. Of :
ourse, a large amount of the
inancing of National progress
s being done by the banks, in
restment dealers and other in
erests; but without the educa
ional work and the systematic i
ollection of small sums by the
nsurance companies, America (
pould not be anywhere near .
that she is today. 1
“The tremendous factor that '•
nsurance companies have be- i
come in the investment field i
worthy of greater attention b;
bankers, and large investors
Not only are these insurance com
panies collecting huge sums bu
—unlike the banks—they are ii
no fear of being obliged at an;
time to pay off and industry ii
general. Some of the companie
can conservatively make lon(
time loans that banks would no
be justified in considering
Therefore, students of funda
mental business and investmeni
conditions should watch the tota
annual figures published on life
insurance as well as figures or
bank clearings, railroad earnings
foreign trade and other important
factors. For the benefit of such
bankers and investors let me saj
that today there is in force in the
United States upwards of $72,
000,000,000 Life insurance car
ried by companies having actual
resources in real estate, bonds,
stocks, mortgages and cash of
$11,000,000,000. Sales of life in
surance are increasing very
rapidly. The year 1925 will show
about $15,600,000,000 of new
insurance written compared with
$3,600,000,000 written in 1915
and $2,400,000,000 written in
1905. The resources of these
companies are doubling about
every ten years. When one adds
to these figures the tremendous
tiusiness of the Fire Insurance
Companies and those carrying
automobile, burglary and various
jther forms or insurance the
;otal result is stupendous. Hence
i not only advise everyone to
iut a portion of their savings
nto insurance, but I advise the
>ig financial interests to give
thought and encouragement to
;his great, useful and rapidly
growing industry. General busi
less throughout the country is
:ontinuing at a very steady rate,
t now registering by the Bab
ionchart 13 per cent above
lormal.”
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