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The Policy Contract

The privilege is usually given to convert cash dividends into paid-up reversions or additions to the sum insured. To make this available, a certificate of good health is sometimes required when the insured elects first to make this application, which, however, continues to be made thereafter without requiring further certificates. The practice of requiring such proof of good health has now been generally abandoned.

When dividends are deferred for periods of five, ten, fifteen or twenty years, the option is usually given to withdraw the surplus in cash or to apply it to increase the form of surrender .value selected, or, if the insurance is x54 continued in force, then to purchase paid-up additions to the sum insured or an annuity to be applied in reduction of subsequent premiums. But if the sum insured is in creased, it is customary to require proof of good health.

Dividends declared after the deferred dividend period has elapsed are usually apportioned annually in cash; but sometimes the policy calls for apportionment every five years or at the expiration of longer periods.

Under deferred dividend policies, no part of the sur plus already accumulated is paid in event of withdrawal or of death during the dividend period. A few com panies, however, have issued accumulative surplus poli cies, under which the surplus may either be withdrawn or be permitted to accumulate and under which, there fore, in event of death or withdrawal, the surplus already accumulated is paid over.

Conversion to Other Forms : It is a common provision in renewable-term policies that the insured may, without proof of good health, change to other forms of insurance, usually at the rate of the attained age, less the application of the value of the term policy, if any, but sometimes at the premium at the original age by paying the difference with interest. Such policies are called "convertible." Upon proof of good health, a change may be made on the former basis from one plan to another in almost any com pany, even though at a lower premium; a change on either basis to a higher premium policy will also usually be permitted without proof of good health. A few com panies insert in their life policies the option to pay up at any time by a single premium or to begin paying up by limited premiums, giving the rates, and in their limited payment policies, the option to change to a life policy at the premium at age at entry, applying the excess of re serve to reduce the subsequent life premiums.

Preliminary Term Conditions : Various modes of mak '55 ing the first year's premium a preliminary one-year term premium have been employed. Massachusetts companies, operating under the Dewey law, in their policies issued before January I, 1903, made no mention that the pre mium was term, but relied solely on the provisions of the law, which provided that these policies be so valued. Though "preliminary term" is now provided for in the laws of several States, usually the requirement is that the policy so specify. Several other companies write their policies precisely as if they were not term the first year, and insert, after the acknowledgment of the receipt of the first year's premium, language of the following purport: "Being the premium for preliminary term insur ance only." Others have made the contract a complete one-year term policy, followed by a separate policy, taking effect upon payment of the second year's premium, both policies, however, being on the one sheet of paper. Others have written the policy as if not term the first year, inserting a stipulation that it should be valued as term insurance for the first year and thereafter on the basis of a level premium insurance beginning one year later and at an age one year higher. Other companies have made the first year's premium pay for insurance against death "within one year from the date hereof," with the privilege of renewing at the end of the year as an insurance of another sort "from that date," thus clearly separating the two contracts. Some of the com panies last mentioned have made only such part of the first year's premium, as equals the whole life premium at the next age, a preliminary term premium. These, where there is an excess premium the first year, account for it by making it a consideration for the privilege of renewal and put up a pure endowment reserve because of it, i. e., value on the straight modified preliminary term plan.

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premium, term, policies, health and usually