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The Policy Contract

Correction for Mistake in Age: An understatement of the age obviously calls for an adjustment of the amount payable under the policy to the amount of insurance which the premium actually paid would have purchased at the rate of premium at the true age. Most policies have a provision for this mode of adjustment and some policies provide for adjustment for misstatement of age, i. e., for increasing the amount payable if the age is over stated, as well as diminishing it if the age is under-stated.

Incontestable Provisions : On June 27, 1879, the Equit able Life Assurance Society of New York made all its policies, old and new, incontestable for any cause, except non-payment of premiums, after they were kept in force three years. The term has since been reduced, first, to two years, and, afterward, to one year. President Hyde said concerning it : "The Equitable is in business to pay losses. It was not organized to engage in litigation with widows and fatherless children, or to make money by receiving interest on what may be due them, or by dis counting policies that should be paid immediately and in full." The policies of nearly all companies are now incon testable after a limited period. Such policies had, before their introduction here, been occasionally issued in Great Britain, an extra premium being charged.

The experiment has also been made of issuing all poli cies "incontestable" from date of issue; but this has been abandoned after a thorough test.

Whether policies containing such a provision are really incontestable in case of fraud is not settled. Public policy is involved and the courts disagree, some holding that a company may thus waive its right to defend, even in event of fraud, and others that it is inconsistent with pub lic policy to permit fraud to be successfully practiced. Seldom, however, has any company actually contested the payment of a claim when this provision was in force.

Assignments : Policies are usually assignable unless payable to minor children or, generally, to children, which may create an interest in favor of children yet unborn. Unless payable to the insured's estate, or the right to change the beneficiary has been reserved, the beneficiaries must join in the assignment to make it valid and binding upon them. The policy usually provides that assignments must be in duplicate, that both copies must be sent to the company, one to be returned with the company's endorse ment and one to be retained by the company; and also, that the company will not be liable for the validity of any assignment. In practice, the company, before paying

over the proceeds of an assigned policy, requires the sig natures of all persons who appear to have or may have any interest. When these are not forthcoming, it awaits an action, pays the money into the court and leaves the parties to fight it out.

Instalment Benefits and Commutation : Some policies promise to pay in instalments, either during a fixed term or for a fixed term and as much longer as the beneficiary may survive. In event of the death of the beneficiary during the lifetime of the insured an arrangement may usually be made for commuting these instalments into an equivalent lump sum payable at maturity; or, in event of the death of the beneficiary after the insured but during the fixed term, then a commutation of the instalments re maining unpaid into a lump sum, payable at once. The privilege is also granted in many policies which are writ ten for a lump sum, of converting the same into payable in instalments equivalent in value to the sum insured. This privilege may usually in such case be availed of by the insured during his lifetime, or by the beneficiary upon making claim. In most policies, likewise, a similar privi lege is given of converting the lump sum into payable by continuous instalments for a fixed period, and as much longer as the beneficiary may survive.

Dividends of Surplus : The usual language of a partici pating policy on the subject of surplus merely stipulates that the holder shall participate in the surplus by receiv ing the dividends apportioned to him by the company. Some companies require each applicant to bind himself and all who may have any interest in the policy to abide by the company's apportionment. This is sometimes in the policy, sometimes in the application.

Application of Surplus : Where dividends are payable annually they are usually available in cash. Until 1907, when the Armstrong laws went into effect in New York, they were usually payable only in case the next year's premium was paid; or, in other words, if taken in cash, they were only available as reductions of the next year's premium, and if applied, only in case the next year's pre mium was paid. Now in all companies doing business in New York, dividends are payable without regard to whether the next year's premiums are paid or not.

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