The policy usually has a table setting forth its value at the end of periods if it be surrendered or if a loan is desired on the policy.
15. Policy loans in policy loan has been the subject of much discussion in Canada. The table shows the total assets and the loans, including premium obligations, upon policies of Canadian life companies, at five-year intervals since 1890 and the proportion which these loans bear to the assets: This shows that, rapid as has been the growth of the assets, the increase in loans on policies has been nearly twice as great and that the proportion is still rising.
The deductions to be drawn from an analysis of the Canadian situation are that policy loans are rapidly increasing and in view of the United States experi ence, they must be expected to rise higher; that in years of financial stringency, exceptional calls will be made upon the life insurance companies and that dur ing financial panics, they must be prepared to find cash, at short notice, for large amounts.
At various times, legislation to restrict the volume of loans on life insurance policies, has been suggested but, as has been pointed out by Mr. R. W. Barton, A. I. A., an English actuary, Life companies see tragedies in families at the death of the breadwinner due to insufficient and neglected assur ance. Banks witness tragedies in life on the failure of their customers in business. Each, by giving such ad vice to the public, as •their experience suggests, can help those willing to learn, to avoid the dangers that have caused disaster ; but to try by legislation to stop bor rowing, or the use of savings, is as hopeless as to try to regulate currency by government fiat. History proves that neither human nature nor currency has ever been made good by act of parliament. With this in mind, only if the dangers of the present system are shown to be insurmountable, would the Canadian companies be justified in seeking drastic legislation to restrict policy holders' right.
The policy loan situation in Canada may be briefly summarized as follows: For the policy loan. 1.—Business men use life insurance companies as custodians of surplus earn ings, to be available when necessity requires, or as a provision of old age.
policy loan is at least a great convenience to the policyholder, and has probably come to stay.
3.—The loan may be used to keep policy in force, by paying premium due.
Against the policy loan. solvent life insur ance company might fail as a result of policy loan provisions in the insurance act.
companies are called on to make loans when investment opportunities arc best.
policyholders, owing to interest rate being stated in policy, can borrow more cheaply than others and a single policyholder may have to pay different/ rates on different policies, causing much confusion.
do not always pay back their loans but borrow more, creating a dangerous con dition.
policy loan is often the first step to the total surrender of the policy.
The following suggestions for reducing the volume of policy loans have been made in Canada from time to time: (1) Notice of intention to borrow should be given by the policyholder, except when loan is re quired to pay premium to keep policy in force.
(2) Government should protect _policyholders against themselves by making it more difficult to borrow do policies.
(3) No loan whatever should be granted on a life policy, covering dependents, except to pay pre miums; other loans to be treated as a com mercial transaction.
(4) A partial remedy would be to educate policy holders to realize the seriousness of mortgaging the protection they have created for their de pendents.
16. Manner of settlement.=There are various ways now of paying the beneficiary. The feeling is grow ing that instead of permitting the policy to be paid all in one sum it is better to have it paid over a series of years, thus providing a fixed annuity. This is espe cially true if the beneficiary is one who is not accus tomed to handling even moderately large sums of money at one time. He may on receiving them have quite a false idea as to the amount represented. Un doubtedly in many cases where the policy has been paid in a lump sum, the real purpose of the insured, to protect the beneficiary, has been defeated.