As a protection of policies against lapsing through non-payment of premiums a pro vision is usually made by comptnies, as for example : If premiums are not paid within one year from the expiry of the thirty days, and death occurs during that time, sums assured and bonuses will be paid in full, under deduction of the ova nine premium and a small fine for arrcar, provided the policy bears a clear surrender value of not less than the premium for one complete year ; when the policy does not bear such a clear surrender value, it can only be renewed, within the year, on evidence satisfactory to the directors as to the health of the life or lives assured and payment of arrears and fine.
Where a policy i assigned to a banker, the notices of premiums falling due are sent by the company to the assured, unless there is a special arrangement to the contrary. The balker must be careful to see that the premiums are duly paid.
A deduction is allowed by the income tax authorities from a person's income, up to one-sixth thereof, for any premiums on assurances effected by a man on his own life or on that of his wife.
A bonus is the periodical division of " profits " amongst the policyholders of an assurance company. In arriving at the amount of premium to be paid, a company " loads " the premium—that is, adds to it a sum to meet expenses. Such part of that " loading " as is not required is returned to the holders by way of the bonus. Some policies are " with profits," whilst others are " without profits." A bonus may be sur rendered for a cash payment, or added to the amount of the policy, or applied in reduction of the future premiums, or used to provide a policy payable at a certain age.
The surrender value is the amount which the company will pay, at any time after, usually, three years' premiums have been paid, to the policyholder on a surrender of the policy. The amount is calculated by the company upon the premiums paid and bonuses declared. The amount can be ascertained by application to the company. A policy may often be sold at rather more than the surrender value.
Insurance companies grant loans upon policies to the extent of 90 or 95 per cent. of the surrender value.
A simple deposit of a life policy as security creates an equitable mortgage, but the usual and proper way of taking a security upon a life policy is to have it assigned to the bank by way of mortgage. Each person in terested in the policy must join in the assignment.
If the policy is taken out by a husband for the benefit of his wife, both must sign the assignment. If the policy is for the benefit of the children, or for the wife and children, the policy is not available as a security as the children under age cannot assign.
Bankers have their own forms of assign ment which usually provide for the ban k's paying the premiums, if the customer fails to do so, and debiting the amounts to the customer's account, and which also give power for the policy to be surrendered by the banker.
Notice of an assignment must be given to the company and an acknowledgment received. 1t is usual to send the notice in duplicate, so that the company may retain one copy and return the other with an acknowledgment thereon.
The Policies of Assurance Act, 1867 (30 & 31 Viet. c. 144), Section 3, states that no assignment shall confer on the assignee any right to sue for the amount of the policy until a written notice of the date and pur port of the assignment have been given to the company at their principal place of busi ness. The date on which such notice is received regulates the priority of all claims under any assignment. But a second mort gagee, with notice of the prior charge, can not, by giving notice to the company before the first mortgagee, obtain priority. By Section 6, the company must, when requested by the person giving the notice, and upon payment of a fee of 5s., give an acknowledg ment of the receipt of such notice.
ln giving notice of an assignment, a banker should ask the company if there are any prior charges upon the policy.
Where a policy is assigned absolutely— that is, on a sale and not as a mortgage—the Act provides a very simple form of assign ment, viz. :—" I, A. B. of, etc., in considera tion of. etc., do hereby assign unto C. D. of, etc., his executors, administrators and assigns, the [within] policy of assurance granted. etc. [here describe the policy]. In witness, etc." When a policy is taken as security, it should show that the age of the person in sured has been " admitted " by the com pany. This is necessary to prevent any question arising, when the policy becomes a claim, as to the correct amount of the premium which should have been paid.
All previous assignments and documents relating to dealings with a policy must be carefully preserved as they may be required by the company when the policy becomes a claim.
An " industrial " policy does not form a banker's security. (See INotisrmAr... LIFE Po Li cY.) For the stamp duties on policies, see POLICY OF INSURANCE.
The stamp duty upon an assignment of a life policy by way of security is the same as in the case of a mortgage (q.v.) ; and upon a sale the same as for a conveyance (q.v.).
Section 118 of the Stamp Act, 1891, enacts : " (I) No assignment of a policy of life insurance shall confer on the as signee therein named, his executors, administrators, or assigns, any right to sue for the moneys assured or secured thereby, or to give a valid discharge for the same, or any part thereof, unless the assignment is duly stamped, and no payment shall be made to any person claiming under any such assignment unless the same is duly stamped.
" (2) If any payment is made in contra vention of this Section, the stamp duty not paid upon the assignment, together with the penalty payable on stamping the same, shall be a debt due to Her Majesty from the person by whom the payment is made." In practice, an assignment is usually stamped to cover the amount of the policy and also an amount to cover bonuses, when the security is required to that extent.
In Scotland, assignments or assignations of life policies are given " for certain good and onerous causes and considerations." Stamp duty, 10s. At the same time a letter of deposit is taken, on which the stamp is sixpence. (See TONTINE POLICY.)