GIFT OF 
 
 1 
 
nX?t- 
 
 The Carnegie Foundation Plan 
 
 of Insurance and Annuities 
 
 for College Teachers 
 
 M. ALBERT LINTON 
 
 Published by ' 
 
 THE PROVIDENT LIFE AND TRUST COMPANY 
 
 OF PHILADELPHIA 
 
 Fourth and Chestnut Streets 
 
 December, 1918 
 
 2261 J2.I8 
 (Rev.) 
 
NOTE 
 
 THIS pamphlet has been prepared for the use of the 
 agents of the Provident Life and Trust Company, and 
 of others who are interested in the principles of insur- 
 ance protection put forth by the Carnegie Foundation. 
 There is no antagonism on the part of the Company 
 to the idea of faculty members availing themselves of the 
 benefits offered to them by the Foundation through the 
 Teachers* Association. Their right to avail themselves of 
 these benefits, and to choose the form of policy in their 
 Association which their good judgment shall dictate, is too 
 obvious to need demonstration. 
 
 Unfortunately the Handbook of the Association and 
 certain publications of the Carnegie Foundation contain 
 statements that may easily give the impression that the old 
 age endowment policy — the policy maturing at some definite 
 age, say between the ages of 60 and 70 — is an inherently 
 objectionable form of insurance. There are thousands of 
 policyholders in this and other companies who hold this 
 form of policy, and we feel it our duty, in the light of the 
 statements of the Carnegie Foundation, to present as simply 
 as possible the principles underlying the old age endow- 
 ment policy issued on a participating basis. Our faith in 
 this form of policy results from our experience with thou- 
 sands of policyholders whose old age endowments have 
 matured. 
 
 In furtherance of this thought this pamphlet was shown 
 to several well known college professors, with the result 
 that we have been asked whether we would be willing to 
 send copies to the members of the American Association of 
 University Professors. Dr. S. S. Huebner, Professor of 
 Insurance and Commerce in the Wharton School of the 
 University of Pennsylvania, says : 
 
 "Your pamphlet deals so fairly with many of the vital 
 topics under consideration in connection with the Carnegie 
 Foundation Plan of Insurance and Annuities, that I would 
 very much like to have it in the possession of every member 
 of the Association. I took the liberty of sending a copy of 
 your pamphlet to Dean Stone, Chairman of the American 
 Association's Committee on Insurance and Pensions. He 
 agrees with me that it would be a fine thing to have the 
 Association membership become acquainted with the points 
 made in your article." 
 
 It is in response to this suggestion that the pamphlet 
 is sent you. 
 
The Carnegie Foundation Plan 
 
 of Insurance and Annuities 
 
 for College Teachers 
 
 M. ALBERT LINTON 
 
 Vice-President, The Provident Life and Trust Company 
 
 of Philadelphia 
 
 Fellow Actuarial Society of America 
 
 Fellow Institute of Actuaries {London) 
 
 °> •. 
 
 Published by 
 
 THE PROVIDENT LIFE AND TRUST COMPANY 
 
 OF PHILADELPHIA 
 
 Fourth and Chestnut Streets 
 
 December. 1918 
 
 2261 12.18 
 
 (Rev.) 
 
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 'ly 
 
 V 
 
 <o 
 
 ^i 
 
 * • • •^ • « • 
 
The Carnegie Foundation Plan of 
 
 Insurance and Annuities for 
 
 College Teachers 
 
 In March 1918, the Teachei^' Insurance and Annu- 
 ity Association of America was incorporated under 
 the insurance law of the State of New York for the 
 purpose of furnishing life insurance and annuity 
 policies to the college teachers of the United States 
 and Canada. The Association is closely allied with 
 the Carnegie Foundation for the Advancement of 
 Teaching which supplied the capital and surplus of 
 $1,000,000. The expenses of the Association will be 
 paid from the income on the capital and surplus or, if 
 this should be insufficient, then from the funds of the 
 Carnegie Foundation. This expense provision has 
 been made in the hope that the Association will be 
 able to furnish insurance and annuity policies at rates 
 lower than the rates of the private companies who, of 
 course, have to meet their expenses out of the pre- 
 miums paid by their policyholders. 
 
 Several publications of the Carnegie Foundation 
 have dealt with the proposed plan of insurance and 
 annuities, which, we are told, has been evolved with 
 the co-operation of experts in Europe and America, 
 and is based upon exhaustive original research. It is, 
 therefore, bound to command serious attention, not 
 only from college teachers, who are most intimately 
 
 414727 
 
concerned, but also froin all who are interested in the 
 appHcatipn of life insurance to the needs of society. 
 
 Two Major Contingencies to Be Met 
 
 The Carnegie Foundation has ably analyzed the two 
 major contingencies facing the average man. First, 
 the contingency of premature death which may plunge 
 his dependent family into privation and suffering, and 
 second, the contingency of reaching the end of his 
 income-earning career without sufficient means to pro- 
 vide adequately for the declining years of himself and 
 his family. The experience of The Provident Life 
 and Trust Company during the last fifty years thor- 
 oughly supports this analysis. It is true in every detail. 
 Ever since the Provident commenced business, it has 
 been advocating and selling a policy prepared par- 
 ticularly to meet these two contingencies. The 
 Company is therefore intensely interested in applying 
 the results of its own experience to test the proposed 
 plan of the Carnegie Foundation. If the Carnegie 
 plan is superior, life insurance companies should 
 adopt it. 
 
 The Proposed Plan 
 
 The Handbook of the Teachers' Association sets 
 forth its ideal plan for meeting the two contingencies. 
 To meet the contingency of dependency in old age, it 
 recommends an annuity policy providing at the retire- 
 ment age, say age 65, a fund sufficient to purchase some 
 form of annuity for the remainder of life. Prior to 
 the retirement age the annuity policy operates upon 
 the simple plan of a savings fund which accumulates 
 
at interest from the periodical payments made by the 
 teacher. To meet the contingency of premature death, 
 life insurance is recommended. For teachers not over 
 40 years of age a special decreasing insurance policy 
 has been devised to accompany the annuity policy. 
 The insurance policy provides that the full face value 
 shall be paid if death occur prior to age 41. At age 41, 
 and each year thereafter, there occurs a reduction in 
 the amount of insurance equal to 3 per cent, of the 
 original face value. At age 70, thirty reductions have 
 occurred and the insurance has been reduced to 10 per 
 cent, of the original face value. Thereafter the reduc- 
 tion ceases. It is further provided that premium 
 payments shall cease at age 65. 
 
 Analysis of the Combination 
 
 For the purpose of analyzing this combination, we 
 shall assume as the basis of our computation the 
 American Experience Table of Mortality and interest 
 at 3^ per cent. This basis provides the smallest net 
 life insurance premiums permitted by law. We will 
 assume that the policy is taken out at age 30, and that 
 the amount of the savings fund that is to be available 
 at age 65 for the purchase of the annuity, and the face 
 value of the insurance policy before any reduction has 
 occurred, are each equal to $10,000. On the basis of 
 these assumptions we find that the net annual premium 
 for the annuity policy is $145, and for the insurance 
 policy $99— a total of $244. 
 
 A teacher therefore who holds these two policies 
 involving a net premium of $244 each year, will be 
 
protected against the two contingencies above dis- 
 cussed. If he lives to attain age 65, the savings fund 
 will have attained its contemplated amount and the 
 annuity will commence. If he does not live to attain 
 age 65, his widow receives both the amount of the 
 savings fund accumulated to date, and the amount of 
 the insurance policy. The following table shows the 
 total amount produced by the two policies if death 
 occurs at certain specified times : 
 
 If Death occurs Age Total Amount 
 
 at end of: Attained Payable 
 
 1 year 31 $10,150 
 
 5 years 35 10,804 
 
 10 years 40 11,759 
 
 20 years 50 11,241 
 
 30 years 60 11,742 
 
 At the end of 35 years, when age 65 has been attained, 
 the savings fund matures for the cash sum of $10,000, 
 with which the annuity is purchased. The premiums 
 cease on the insurance policy which then has been 
 reduced to the face value of $2500, payable in event of 
 death. The reduction continues at the rate of $300 
 each year until at age 70 the face value has been 
 reduced to $1000. 
 
 A Hybrid Endowment 
 
 The irregular series of amounts shown in the table 
 at once suggests the possibility of simplifying the com- 
 bination so that the amounts would remain uniform 
 
from year to year. This simplification is readily made 
 and, moreover, may be embodied without the slightest 
 difficulty in one single contract instead of two, as in 
 the Carnegie plan. If the proposed simplification 
 were made, the same net premium of $244 would 
 provide a policy paying $11,240 in the event of death 
 at any time prior to age 65, and also the same sum, 
 $11,240, if the policyholder survived to age 65. 
 Under this simplified plan the insurance would cease 
 as soon as the $1 1,240 had been paid at age 65. There 
 would seem to be no valid reason for insurance pro- 
 tection after the savings fund has attained its contem- 
 plated total. 
 
 The simplified combination at which we have 
 arrived is nothing more or less than the true endow- 
 ment policy. The true endowment policy, although 
 embodied in one single contract, is likewise a combina- 
 tion of a savings fund and a term insurance element. 
 But it possesses the advantage that the continuing 
 increase in the savings element is exactly and auto- 
 matically balanced by the continuing decrease in the 
 insurance element, so that exactly the same amount is 
 payable in the event of premature death as would have 
 been paid if the policyholder had lived to complete his 
 savings fund. Nothing could be simpler than this 
 single contract performing its double function. More- 
 over, experience has demonstrated that the true endow- 
 ment maturing at the close of a man's income-earning 
 career is an ideal form of policy with which to provide 
 against the two contingencies of life, so ably analyzed 
 by the Carnegie Foundation. The result of our 
 analysis leads to the conclusion that the Carnegie com- 
 
bination is simply a hybrid form of endowment policy 
 considerably more complicated than the true endow- 
 ment. 
 
 Does Carnegie Foundation Understand the 
 Endowment Policy? 
 
 In view of this conclusion we are completely at a loss 
 to understand why the Carnegie Foundation in writing 
 of the endowment policy fails to emphasize that the 
 endowment policy is peculiarly adapted to meet the 
 two contingencies for which their peculiar, two-policy 
 combination was devised. In the Supplement follow- 
 ing this article, we reprint the three extended refer- 
 ences to the endowment policy appearing in Bulletin 
 Number Nine (1916) and the Annual Reports for 
 1916 and 1917 published by the Foundation. Through- 
 out these references it is evident that the Foundation 
 stresses the conception of the endowment policy as an 
 "investment" policy. In one sense, of course, the 
 endowment is an investment, but it is an investment 
 in exactly the sense that the word applies to the Car- 
 negie combination. In fact, the combination of the 
 $10,000 Carnegie decreasing insurance policy with the 
 $10,000 annuity policy involves a net premium of $244, 
 against $217 for the regular $10,000 Endowment at 
 age 65, although each provides the same sum, $io,ooo, 
 at maturity. In other words, the cost of the larger 
 insurance element in the Carnegie combination will 
 make the combination, from the investment point of 
 view, appear less favorable than the Endowment at 65. 
 Yet in spite of this fact we read in the recently pub- 
 lished Handbook of the Teachers' Association* that 
 
 ♦Pp. 12, 13. 
 
 8 
 
endowment insurance "is the most expensive form of 
 insurance as it provides both insurance protection and 
 investment" ; and that "the Association does not regard 
 the endowment form of insurance as adapted to the 
 circumstances of teachers in general. To meet excep- 
 tional cases it offers endowment insurance maturing at 
 age sixty- five/' (The italics are our own.) 
 
 An Example^of Actual Cost 
 
 At this point it will be instructive to investigate the 
 cost of one of these "most expensive forms of insur- 
 ance" which recently* matured in the Provident 
 which, of course, was not subsidized as to its manage- 
 ment expenses, as is the Teachers' Association. The 
 policy which matured was an Endowment at 65, taken 
 originally at age 30. The actual cost upon a $10,000 
 basis is shown by the following figures: 
 
 Total premiums paid to the Company. . . .$9,055 
 Total surplus returned by the Company. . 2,575 
 
 Difference=:total net cost during 35 years. . $6,480 
 Average net cost per year $185 
 
 Comparing this average net cost of $185 for a Provi- 
 dent $10,000 Endowment at 65, with the cost of the 
 hybrid combination, how can the endowment be con- 
 demned as expensive? 
 
 It will be noted that the low net cost shown in the 
 foregoing example was attained as a result of the dis- 
 tribution of surplus. It shows clearly that the ultimate 
 cost to the policyholder does not depend primarily 
 upon the gross premium charged, but upon the amount 
 
 ♦September, 1918. 
 
of surplus realized. Under a participating contract, 
 the actual cost of the insurance depends upon the 
 experience of the company and not upon the assump- 
 tions underlying the premium calculations. 
 
 Why Non-Participating Policies? 
 
 Now a word or two about the policies of insurance 
 that the Teachers' Insurance and Annuity Association 
 plan to offer. The Association will issue all the usual 
 forms of insurance and annuity policies, although the 
 decreasing insurance policy combined with the annu- 
 ity policy represents, in the eyes of the Carnegie 
 Foundation, the ideal scheme of complete protection 
 for the teacher not over 40 years of age. The Associa- 
 tion will conform to the insurance laws of the State of 
 New York and will issue insurance policies at net 
 legal rates, that is, at rates not lower than those com- 
 puted upon the net American 3^ per cent, basis. We 
 are told that the policies will be non-participating as 
 "it is evident that distributions on a participating 
 policy issued at net rates would be so small during the 
 first years of its existence that if distributed in annual 
 dividends they would not in some cases pay the cost 
 of postage." * In view of the fact that no expense 
 charge will be borne by the policyholders this is a 
 remarkable statement. And we shall see why it is 
 remarkable if we compute the surplus that would be 
 realized should the actual rate earned be 4j4 per cent, 
 and the actual mortality rate experienced be 70 per 
 cent, of that shown by the American Table. (For the 
 five years 1913 to 1917 inclusive, the average rate of 
 forty-five private companies was 66 per cent.) The 
 
 •Twelfth Annual Report (1917), p. 46. 
 
 10 
 
following figures relate to $10,000 of insurance taken 
 at age 30. 
 
 Net Yearly Average Yearly 
 
 Kind of Policy Premium: First Year Surplus for 
 
 American 3J^% Surplus 35 Years 
 
 Endowment at 65 $217.10 $27.10 $61.00 
 
 Twenty Payment Life.. 247.10 27.30 62.80 
 
 Ordinary Life 171.90 26.80 56.30 
 
 Term to 65 120.90 26.30 50.90 
 
 Since none of this surplus will be needed for expenses, 
 it will all be available either for building up a con- 
 tingent fund or for distribution. Assuming that one- 
 half is withheld for contingencies, the remaining half 
 is by no means insignificant. If the policyholder is to 
 receive his insurance at actual cost the surplus must 
 eventually be distributed. The surplus under the 
 policies of the Teachers' Association will undoubtedly 
 be large, and we see no valid reason why the contracts 
 should not provide for participation unless it is de- 
 sired to withhold the surplus from the control of the 
 teachers. * 
 
 The Published Rates of the Association 
 
 Thus far our analysis of the Carnegie Foundation 
 combination has involved net premiums computed upon 
 the American 3% per cent, basis. The actual rates 
 published in the Handbook of the Teachers' Associa- 
 tion indicate that the insurance premiums have been 
 computed upon this basis, but that the savings fund 
 annuity premiums, as permitted by the law relating 
 to annuity calculations, have been computed upon a 
 
 * The Association will probably not be able to confine certain of its 
 expenses within the assumed mortality gains specified in the New York law, 
 so that the premium rates, if made participating, should be somewhat 
 increased to meet the technical requirements of the law. The effect upon 
 the net cost, however, would be negligible since the distributable surplus 
 would likewise be increased. 
 
 11 
 
4 per cent, basis. Now the higher the interest assump- 
 tion, the smaller the resulting premium, since the more 
 interest received, the less money the policyholder will 
 be called upon to pay. Therefore, the combination of 
 the savings fund premium computed upon a 4 per cent, 
 basis, with the decreasing insurance premium com- 
 puted upon a Zy^ per cent, basis, yields a total that is 
 smaller than the total of the two net 3j^ per cent, pre- 
 miums which we employed to obtain a true comparison 
 with the regular Endowment at 65. We found (page S) 
 that $244 was the total net yearly premium on a 3% per 
 cent, basis for the Carnegie combination of a $10,000 
 annuity policy with the $10,000 decreasing insurance 
 policy. The 3j4 per cent, net premium for the true 
 $10,000 Endowment at 65 is $217, or $27 less. When 
 we use the published rates of the Teachers' Association, 
 where the annuity premium is computed upon a 4 per 
 cent, basis, this difference is reduced to about $10. * 
 
 For example, from page 99 of the Teachers' Associa- 
 tion Handbook, we learn that $8.58 is the monthly 
 premium at age 30 for the Association's $10,000 de- 
 creasing insurance policy. From Table II on page 1 1 1 
 we compute that $11.08 is the Association's monthly 
 savings fund premium to accumulate $10,000 in 35 
 years. The two together, therefore, amount to $19.66. 
 From page 109, we learn that the monthly prem- 
 ium at age 30 for the Association's $10,000 Endowment 
 at 65 is $18.80. On the yearly basis therefore, the pub- 
 lished rates appear to indicate that the combination 
 costs but about $10 more than the endowment. 
 
 * In the interest of simplicity and to emphasize principles rather than, 
 minor details, no reference is made in this comparison to any disability 
 element that may be contained in the Association's premiums. 
 
 12 
 
From what has been said upon the subject of partici- 
 pation, it is evident that the reduction in the difference 
 between the two premiums would be nullified in the 
 long run if the teachers were granted the right to re- 
 ceive the surplus realized upon their policies. For 
 obviously the surplus realized from interest earnings 
 would be greater under a 3j/2 per cent, contract than 
 under a 4 per cent, contract. Under a participating 
 policy, as stated above, the ultimate actual cost depends 
 upon experience, and not upon the assumptions under- 
 lying the premium calculation. 
 
 Joining the Issue 
 
 The Teachers' Association is a fine conception 
 affording college teachers an assistance which does not 
 savor of charity. The general principles laid down for 
 its guidance are sound. Among the private companies 
 there will be no feeling of rivalry with the new Asso- 
 ciation which they welcome to the insurance brother- 
 hood. It is in no unfriendly spirit that regret is 
 expressed that the Carnegie Foundation and the 
 Teachers' Association have apparently failed to see 
 how, for the average man, the well-tried endowment 
 form completely carries out, in the simplest and most 
 effective way their own basic principles. Through 
 their failure to see this clearly they put themselves in 
 the false position of criticising the endowment form 
 as expensive, and then of recommending a combination 
 which, compared upon a participating basis, requires a 
 larger outlay of money, but provides the same sum at 
 retirement. In presenting our analysis of the combina- 
 tion, we are fortified by the Provident's experience with 
 thousands of satisfied policyholders who have lived to 
 
 13 
 
receive payment under their matured old age endow- 
 ments. And according to our mortality experience, 
 about sixty-eight out of every hundred policyholders 
 who insure at age 30 live to age 65. 
 
 The idea suggests itself that the real reasons for 
 recommending the somewhat cumbersome combina- 
 tion of two policies, one savings and one protection, are 
 not brought forward. One reason may be that the 
 Carnegie Foundation believes that the separation into 
 two policies will render it easier for the college to 
 assist financially in providing the annuity at retire- 
 ment. Another may be that it believes it wise to pro- 
 vide an annuity policy against which the teacher will 
 not have the right to borrow. If these be the real 
 reasons, the objections to the well-tried, satisfactory 
 endowment plan are wholly extrinsic; and it is a matter 
 of regret that the endowment form of insurance should 
 have been presented as inherently objectionable. 
 
 We, of course, have nothing to do with the form of 
 Teachers' Association policy which any teacher may 
 choose. We have to do only with our own policy- 
 holders, present or prospective, who may not have 
 noticed the inconsistency in the publications of the Car- 
 negie Foundation and in the Handbook, between the 
 criticism of endowment insurance as expensive, and the 
 recommendation of a still more expensive form con- 
 taining the identical endowment element; or between 
 the statement in the 1917 Annual Report that endow- 
 ment insurance is an "investment rather than a means 
 of protection against risk," and the warm recommenda- 
 tion of a savings fund annuity policy as a means of pro- 
 tection against one of the major risks of life — the risk 
 of dependency in old age. 
 
 14 
 
English Retirement System Based Upon 
 Endowment Policy 
 
 It is interesting to note that the English Universities 
 in their Federated Superannuation Plan employ the 
 old age endowment as their standard for teachers with 
 dependents, and the annuity policy alone for teachers 
 without dependents. In our judgment these two poli- 
 cies, with perhaps the addition of short term insurance, 
 form the basis of the ideal retirement system. Further- 
 more, a system of this kind possesses great flexibility. 
 The annuity and savings fund accumulation options, 
 which will be incorporated in the savings fund annuity 
 policy of the Teachers' Association, may be incorpo- 
 rated in an old age endowment policy. 
 
 If it is not desirable that the teacher withdraw from 
 teaching when the endowment matures, say at age 65, 
 provision can be made for continuing the premium pay- 
 ments on a pure savings fund basis, so that an increased 
 accumulation will be available for the annuity when 
 retirement does take place. If retirement should occur 
 prior to maturity of the endowment the cash value of 
 the endowment is available to purchase the annuity. 
 
 If the college desires to render financial assistance 
 only in building up the fund which will provide the 
 retirement pension, it may do so under the endowment 
 policy, since the endowment premium involves a 
 definite savings fund element that may always be 
 calculated. 
 
 It may be desired to limit the teacher's power to 
 borrow against the accumulation standing to his credit. 
 Such borrowing, if extensively indulged in, would 
 
 15 
 
largely defeat the purpose for which the retirement 
 plan was instituted. One way of meeting this problem 
 when the endowment policy is adopted as the standard, 
 is to have the policy issued in favor of a Trustee or 
 Trustees appointed for the purpose. The Trustee in 
 return would execute an agreement with the teacher 
 providing that if the policy proceeds should become 
 payable, they would be applied by the Trustee in a 
 manner specified by the teacher. This is the method 
 adopted by a Retirement Fund recently established for 
 teachers in schools under the care of Philadelphia 
 Yearly Meeting (Fourth and Arch Streets) of the 
 Society of Friends. 
 
 Conclusion 
 
 The Provident Life and Trust Company has a pecu- 
 liar interest in the Carnegie plan for the reason that 
 the Company has had an extensive experience with 
 endowment insurance. Prior to the first of December, 
 1918, it had paid, since the organization of the Com- 
 pany in 186S, $51,700,000 in matured endowments, as 
 against $52,600,000 for death claims. Last year 66 per 
 cent, of its new business was on the endowment plan, 
 written to mature, on the average, at age 63. During 
 the same year the other companies operating in the 
 State of New York wrote but 17j^ per cent, of their 
 new business on the endowment plan. We have seen 
 the old age endowment policy work out so satisfactorily 
 in thousands of instances that we are more and more 
 convinced that it is the ideal form of policy to provide 
 protection against the two contingencies of premature 
 death and dependency in old age. 
 
 16 
 
SUPPLEMENT 
 
 Views of Carnegie Foundation Upon Endow- 
 ment Insurance 
 
 The indices of Bulletin Number Nine, and the 1916 and 1917 
 Annual Reports, all published by the Carnegie Foundation, contain 
 five references to Endowment Insurance or Endowment Policies. 
 Of these references the three which present the attitude of the 
 Foundation toward endowment insurance are reprinted below. In 
 the foregoing article we have commented upon the conclusions that 
 we draw from these quotations. 
 
 Bulletin Number Nine, Page 27 
 
 "For the present misconception of the function of insurance 
 the great insurance companies are in part responsible. They 
 have educated the public away from the primary use of insur- 
 ance. The process has been a natural one. Endowment and 
 tontine policies mean large payments, great accumulations in 
 the hands of the companies for investment, and greatly increased 
 commissions for the agents. The enterprising life insurance 
 agent naturally sells an ordinary life or a term policy only 
 after he fails to persuade the purchaser of insurance to take 
 one of the more expensive forms. For teachers, as for all other 
 men upon fixed salaries, investment policies are essentially against 
 their interest. They are justified upon one ground only, and that 
 is the ground usually assigned by teachers themselves. Only by 
 creating a definitely recurring obligation does the typical teacher 
 find it possible to save money at all. He realizes, when his 
 endowment policy matures at the end of twenty or thirty years, 
 that as an investment it represents a poor return, but he consoles 
 himself with the reflection that but for the insurance policy he 
 would most probably have saved no money at all." 
 
 Eleventh Annual Report (1916), Page 46 
 
 "Only one complaint of a definite sort has appeared in 
 reference to the statements concerning insurance made in the 
 Bulletin. This came from the actuary of a company whose 
 
 17 
 
principal business is the selling of endowment policies. It 
 referred to the Bulletin as an attack upon endowment insurance. 
 
 "It requires but a glance at the Bulletin itself to show the 
 mistake of this view. In no respect was endowment insurance 
 as such attacked. It was shown, however, that endowment 
 insurance was not that form of insurance adapted to the needs 
 of a man upon modest salary, who has a pension guaranteed 
 to him if he lives to a certain age. To a man so circum- 
 stanced insurance as an investment offers meagre returns. Two 
 reasons influence teachers in the purchase of such policies, out- 
 side the solicitations of the agent. The first is that by binding 
 himself to a fixed obligation of definite amount each year, the 
 teacher forces himself to save money. The second is that an 
 endowment policy is a convenient security upon which to bor- 
 row, a circumstance which too often results in defeating the 
 purpose of insurance. The endowment policy does not meet 
 the need of legitimate insurance for men circumstanced as are 
 teachers. This is no criticism upon companies which sell this 
 form of insurance, but it illustrates the fact that the selling 
 point of view in life insurance does not always conform to the 
 interest of the buyer. 
 
 "The criticism, so far as it undertook to compare the results of 
 term insurance as here offered with those obtained in the last 
 thirty years from endowment policies, was entirely misleading." 
 
 Twelfth Annual Report (1917), Pages 51, 52 
 
 "Endowment policies represent a form of insurance in which 
 the purpose of protection is in large measure subordinated to 
 that of investment. Endowment policies provide for the pay- 
 ment of the face of the policy, not only upon the death of the 
 insured, but also at the end of the stated term, if the insured 
 be still living.* This form of policy is extremely popular among 
 teachers as well as among other purchasers of insurance. The 
 notion that the insured is providing something not only for 
 the protection of his dependents, but also something for his own 
 
 ♦These are exactly the reasons why the old age endowment fully 
 protects against life's two major contingencies — premature death and 
 dependency in old age. 
 
 18 
 
protection and profit, is one that appeals to a well-nigh universal 
 human trait. It departs, however, from pure insurance, in two 
 respects. The motive is no longer simply the protection of 
 dependents. Also, such insurance is an investment rather than 
 a means of protection against risk.* 
 
 "The argument generally advanced in recommending this 
 form of insurance is that it constitutes a safe method for saving 
 and one open to the individual of small and large means alike. 
 A large number of teachers invest in endowment policies for the 
 same reason that other men of limited income make such invest- 
 ments, influenced partly by the arguments of the life insurance 
 agent, who generally prefers to sell an endowment policy, and 
 partly by the very natural feeling that here is a reservoir to 
 which he may go in case of any pressing need." 
 
 ♦Why not a protection against the risk of dependency in old age, the 
 very risk against which the Foundation would provide by means of a 
 savings fund annuity policy? 
 
 19 
 
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 414727 
 
 
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 UNIVERSITY 
 
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