Industrial Life policies developed in the middle of the nineteenth century as a form of life assurance which would appeal to the industrial classes in Britain. It provided small benefits for very tiny premiums. ‘Penny Death’ policies were quite normal. For a penny a week a sum could be assured which would cover funeral expenses, and even a tombstone. It is perhaps no accident that these policies developed immediately after the Poor Law Amendment Act had created the workhouse system. Fear of that ultimate disgrace, to be buried by the parish in a pauper’s grave, drove even the very poor to pay their insurance money to the insurance agent who called weekly and became in many ways a friend and legal and financial adviser to his poor and often illiterate customers. Today the Industrial Life Offices, through their countrywide network of agents, still have their finger on the nation’s pulse, though now the benefits are less gruesomely necessary and the weekly savings may be pounds rather pence.
Life assurance is primarily designed to cover death or retirement of the insured. It is therefore often a provision for dependents. The possible benefits are:
(a) A lump–sum benefit at death. This may be considerable or may only be enough to cover funeral expenses.
(b) An income benefit commencing at death and lasting the widow for her life, or until re-marriage, or until the children reach a certain age.
(c) The provision of a pension in old age.
(d) The repayment of a mortgage on a house, so that the widow and dependents are sure of ownership of the property on the death of the mortgagor. As property values have risen in recent years, it has become more difficult for a widow to keep up the payments herself on the property. Many building societies and banks now insist that mortgages must be backed up by life assurance. It is distressing for a Society or bank to evict a family because repayments are no longer being made, at a time when they have recently suffered the loss of their bread-winner.
The chief type of policy are:
(a) Whole life policies, payable at death; the premiums being payable either throughout life or to some agreed age, usually 60 years of age.
(b) Endowment policies. Here the sum agreed is payable at the end of a given number of years, or at death if this occurs sooner. It is a popular form of long term-term saving, carrying with it the benefit of insurance cover during the time of the saving. ‘With-profits’ policies return not only the sum assured, but profits actually made on the savings, which have been invested by the company. Usually 90 per cent of the profits made are returned to the policy holder.
(c) Family income policies. In this type of policy it is arranged that if death occurs during the period stated in the contract the benefit will be paid not in one lump sum but by a series of regular repayments, terminating with a final sum at the end of a period. This is very suitable for a man with a young family, since it covers his widow and dependents with a certain minimum income at once in the event of his death. This income will continue until the end of the period agreed, which is usually arranged to cover the time before the children are able to support themselves.
(d) Mortgage-security policies. These have been referred to the above.
(e) Group life policies. These are very convenient to small employers who cannot afford a pensions department to manage investments for pension purposes. The policies can be taken out to cover an agreed sum on each member of the group. An employee who leaves the firm can usually arrange to commute his benefits to a personal insurance cover on terms suitable to his age and pocket.
(f) Unit-linked policies. These policies are issued with a minimum of investigation into the life being insured. They are issued in conjunction with an Investment Trust, about 93 per cent of the monthly sum invested being used to purchase units in the trust. The other 7 per cent is used for insurance cover. Income tax advantages and capital gains on the units invested make this type of policy attractive to persons paying income tax at a standard rate.
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