LIFE INSURANCE: FIVE FORMS

Of all U.S. businesses, none is more carefully tailored to the needs of its individual customers than life insurance. In 1957 the 1,144 U.S. life-insurance companies had something for virtually every one of their 106 million policyholders with an inventory of thousands of policies ranging from a $100 industrial policy, which costs less than 5-c- a week, to a $1,000,000 policy, with premiums as high as $100,000 a year. All are variations of five basic kinds of participating insurance:

Straight Life Insurance, the industry's traditional bread-and-butter policy, which provides a lump-sum payment to a policyholder's beneficiaries upon his death--and at a relatively low premium. Another feature is that policyholders can stop paying premiums whenever they choose, get the equity they have put into the policy in cash, or take a reduced paid-up policy. A young man of 23, for example, can buy a $10,000 straight-life policy at a premium cost of about $180 annually. His beneficiaries would get $10,000 when he dies; if he wants to stop paying premiums at 65. he can get an accumulated cash equity of $6,140 or a reduced paid-up policy of $8,150.

Term Insurance, the cheapest of all life insurance and the best policy for a relatively low-wage earner who wants maximum protection at the lowest cost while his children are growing up. A man of 30, for example, can buy a $10,000, fifteen-year term policy for only $100 a year, about half the cost of straight life insurance. The one trouble is that term insurance builds up no equity for the policyholder. Once he stops paying premiums, he gets no cash, has no insurance, though he can convert to straight life insurance at higher premiums at the end of his term.

Limited Payment Life, a combination of straight and term insurance, which provides lifetime protection but limits payments to 15, 20 or 30 years. Though premiums are high, limited life is best for the man who wants lifetime protection but wants to confine payments to his best earning years. A man of 23 with $10,000 worth of 20-year limited life must pay $320 a year until he reaches the age of 43. Cost of the same policy, if he takes it out at 33: $390 annually.

Endowment Life, one of the "savings-type" policies designed for people who want life-insurance protection plus a source of income to provide for their old age. A big favorite of unmarried career women and family men who have other insurance, one form of a $10,000 endowment policy pays $10,000 in insurance if the policyholder dies before the age of 65, a lump sum of $10,000 when he reaches the age of 65, or an income of $65 monthly for the rest of his life. The drawback is that because endowment policies build up big cash values, premiums are the highest of all. Cost of a $10,000 endowment for a man aged 30: about $300 per year for a monthly income of $65 after the age of 65. Since actuarial tables show that men die sooner than women: a woman would only get about $55 a month for the same premium payment.

Annuity, a less expensive savings policy, which differs from an endowment in that it provides income for the policyholder after a certain age but upon his death only pays back the policyholder's own equity. Annuities are best for people who are already covered by standard life insurance but want a steady income in their old age. An annuity providing $100 a month at the age of 65 would cost $350 a year for a man starting out at 30, while a woman would have to pay $400 annually for the same income at 65.

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