The successful agent Author:William Alexander Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER IV. THE SINGLE PREMIUM. As the natural plan of paying for insurance lacks popularity, other methods have been devised. One of these methods is for th... more »e company to charge a single premium. To discover a single premium, payable in advance, which shall be equivalent to the series of annual payments called for on the natural basis, we may proceed as follows: Selecting any age, and starting with the number of persons who (according to the mortality table) are living at that age, we must proceed to find out first what amount of money will be needed each year to pay the death losses of that year. Then, if we should take no account of interest, the sum of these items ' would be the total amount needed. But we take account of interest; and although we have seen that interest cuts a very small figure in computing the premiums on the natural basis, the reverse is true when we come to the single premium. The company receives all its money in advance, while payments to policyholders are made gradually, as deaths occur. Hence, by investing these receipts, a large interest income is obtained. And as the interest thus gathered is as good for paying death claims as the money directly contributed by policyholders, the single premium actually charged is considerably less than would otherwise be necessary. To discover the part of the work which will thus be done by the interest earned (thus determining the correct net single premium) it is only necessary to discount (at a given rate of interest) the sum of money needed at the end of each year, to pay the death claims for that year, and then to add together all the items thus obtained. These items thus discounted, when added together, will make the aggregate premium; and this aggregate divided by the number of persons will gi...« less