,
which are the prevailing type. The mutual company legally belongs to
the policyholders. The gross premiums in reserve insurance are, for
the purpose of safety, fixed at a figure larger than the expected cost
of the insurance, and normally the earnings from interest are higher,
the mortality is lower, and expenses are less than those on which the
calculation of rates is based. From the excess of income resulting,
the company sets aside a surplus and then divides the rest among
the policyholders. These returns, virtually but the refund of excess
premiums, are called "dividends" (a somewhat misleading term, not
to be confused with dividends on corporate stock). The policies
that receive dividends are called "participating" and are said to
participate in the earnings. Formerly the majority of policies paid
"deferred" dividends after 5, 10, or 20 years, according to various
tontine and semi-tontine plans, the survivors to these periods
receiving their dividends plus those of the other policyholders who
had died or had withdrawn from the company. This form of payment
having been found objectionable, it was made illegal in New York and
other states, and in most cases dividends are now paid annually. The
stock company, organized for profit, frequently charges lower premiums
for "non-participating" policies, and then retains such profits as may
result from keeping expenses below receipts.

The most popular policies are term policies (usually for 5, 10, 15,
or 20 years); ordinary life policies with annual premiums; limited
payment life policies (the policy payable at death, with premiums
fully paid up after 10, 15, or 20 years); and endowment policies (the
face of the policy payable after 10, 15, or 20 years if the insured is
still living). An endowment policy must be understood to be a regular
term policy of insurance for the specified number of years, plus a
plan of regular annual savings, which at compound interest, accumulate
to the face of the policy. Many persons are attracted to endowment
insurance by the oft expressed thought that "you don't have to die to
beat it." But this is a mistaken thought. For the premium in endowment
insurance is much higher than that for life insurance alone during the
same period, so that the endowment is merely a pretty convenient but
somewhat costly plan of saving, hitched on to an insurance policy,
with which "actuarially," it has no essential connection. In "scientific"
insurance the ins