Because of these peculiar features of life insurance, the study of the subject is attended with somewhat greater difficulties than the study of other branches of insurance. The same considerations impelled life insurance compa nies to begin collecting statistics from the outset, which would enable them to cope successfully with these diffi culties, and they have proceeded much further in this re gard than other insurance companies. Upon the results of these statistics, they predicate their premiums, and without such a basis life insurance would perhaps be an unsafe speculation.
Two other facts lead life insurance companies to exer cise great care in determining rates of premium. In other branches of insurance, the companies may cancel the in surance by returning a pro rata portion of the premium. They may also refuse tri renew when the term for which the premium was paid has elapsed. And they may make their own terms about renewing. But a life insurance company must not reserve the right to cancel or to refuse to renew or to alter the rate of premium.
In other branches of insurance, as has been said, an insurance payable to a person who has no interest in the thing insured is recognized to be a gambling transaction. The same thing applies with yet greater force to a life insurance, and it would clearly be against public policy to permit gambling where a human life was made the contingency. Insurances, effected, by one man on the life of another, are, therefore, viewed with suspicion, unless the nature and the amount of the insurable inter est are clear. The question, what constitutes insurable
interest, remains to be discussed, however, in its proper place.
The amount of insurance is, as has been said, also an item of importance; for even a contract of indemnity, based upon a valid insurable interest, can be made a gambling contract if the insurance is for an amount in excess of the financial loss. The difficulties of determin ing what is over-insurance upon a life, however, when insured in favor of persons who are dependent upon the person whose life is insured, coupled with the fact that the sum payable to persons whose insurable interest is limited, such as creditors, is usually limited to the amount of such interest, have made this question of little im portance in life insurance. Moreover, under-insurance has been the rule and over-insurance the rare exception; and the natural course of a whole life insurance, as has 22 been seen, whether purchased by level premiums for life, by limited premiums or by a single premium, is toward the reduction and ultimate extinction of the insurance, by the "self-insurance" fund growing until equal to the sum insured. Thus a gradual reduction takes place as the value of the life diminishes because its probable duration is less. Few men, also, can afford an outlay sufficient to supply premiums for an amount of insurance that exceeds the values of their respective lives.