The endowment policy is not however the only form of life insurance which the companies issue. A person may buy a policy according to the terms of which he pays a fixed sum each year throughout his life, and at his death the amount named in the face of the policy is paid to the beneficiary. This form of policy is called the ordinary life or whole life policy. When the whole life policy is paid for by a fixed number of annual payments it is called a limited payment policy. Still another form of insurance is that under the weekly insurance policy by which payments of a fixed sum, as ten or twenty-five cents, are made weekly to a collector of the insurance company. This form of policy is generally written for amounts under five hundred dollars and is payable to the beneficiary at the death of the insured. Its prime object is to provide a sum sufficient to pay funeral expenses. The premiums for all forms of life insurance policies are determined by the companies by means of exact mathematical calculations. These calculations are based on tables which show the number of people who die at various ages. These mortality Computation of Premiums. tables are made up from records of the dates of birth and death of large numbers of persons and owe their accuracy to the law of averages. While it is impossible for an insurance company to tell at what time a particular individual will die, it can tell at approximately what time ten thousand persons will die. The premiums charged by life insurance companies and printed in their rate books vary slightly as do the privileges contained in their policies, but the differences are not important. Below are examples of insurance premiums as computed according to the mathematical tables above referred to. tion. The purchaser of an insurance policy may have two objects in view. He may desire to provide a means by which his family or dependents are insured means of livelihood if he should die or he may wish a convenient method of investing Insurance his surplus earnings. To aid the person thus desiring as Protecto secure protection for his family the policies of insurance frequently provide that the face of the policy will be paid to the beneficiary in monthly payments beginning at the death of the insured. This provision may be in either an endowment or whole life policy and is called the monthly income feature. It has the advantage of relieving the beneficiary, who may not be familiar with business matters, from the task of investing a large sum of money as would be the case if the payment was all made by the company in one sum. Endowment ment. The endowment policy is particularly adapted to the person who desires a convenient method of investment and at the same time wishes to provide protection for his family. It practically compels a person to save a definite Insurance sum each year as the premium comes to be consider- as an Invested as something which must be paid. His savings made by the purchase of an endowment policy and the payment of premiums thereon are invested by men whose business it is to know all about investments. Moreover the business and investments of the company are carefully supervised and inspected by public officials. By the purchase of an endowment policy a young man or woman may, by regular annual payments, provide a substantial sum which will be available at the end of the endowment period either for investment in business or the purchase of a home or for any other purpose. In considering the value of an endowment policy it must not be forgotten that in addition to the lump sum which will be paid to the insured at the end of the period, the policy holder is also insured of the fact that the face value of the policy will be paid to his beneficiary should he die before the expiration of the endowment period. One of the most common forms of investment is buying land and houses, i. e. real estate. This form of investment is desirable because of its comparative safety, the possibility of using the property as a home and the tendency of wisely selected property to increase in value. When one invests in real estate he must take into account the expense of maintaining the propertyrepairs, taxes, insurance, as well as its liability to depreciate in value. Real estate is often difficult to sell readily Real Estate. at its full value. When money is loaned with real estate as security the prudent lender limits the loan to about 60% of the value of the property. He receives a promissory note secured by a written document signed by the owner. This document is called a mortgage and it guarantees the payment of the note. If the conditions of the agreement are not met the creditor through a process of law may secure payment of the note with interest including the cost of suits and clerk's fees. If the mortgagor does not pay the sums ordered by the court the mortgaged property may be turned over to the mortgagee to satisfy the debts. The owner also guarantees to keep the buildings insured and in repair, to pay taxes when due, etc. Frequently two or three men desire to invest money in a small business enterprise. In such cases they usually form a partnership and share their gains and losses according to the amounts they invest. If one man invests $1000 and another invests $2000 the first owns 1-3 of the property hence he shares 1-3 of the profits or 1-3 of the losses while the second man shares 2-3 of the gains or losses. In case of failure each partner becomes responsible for the entire debt of the firm after the firm A Partner- assets have been exhausted no matter how small his ship. interest may be. In a partnership the evidence of ownership is contained in the partnership agreement. The men who actually conduct the business and share in the profits are called real partners. Sometimes members of the firm are not publicly known and take no part in the management of the business. Such members are known as silent or dormant partners. The money, merchandise, buildings, land, equipment, etc., invested in a commercial enterprise is called the capital. If a large capital is required or many partners are interested in the business a partnership is not desirable. In such a case a stock company is organized and incorporated Capital. according to the laws of the state. It will be seen later that the advantages of a corporation are: 1. Each stockholder is financially responsible for the par value of his stock and no more. 2. Stock is easily transferred and bookkeeping incident to computation of dividends and transfers is simplified. 3. Small investors are enabled to participate Advantages in great business enterprises. of a Corporation. 4. It makes possible a great expansion in capital and organization. 5. An opportunity is afforded for one to acquire an interest in a business where he would not be qualified to assume direct control. 6. The firm name may be perpetuated and the benefits derived which come from its established reputation. 7. One of the main reasons why a corporation is more desirable than a partnership is that in a partnership the death of any partner dissolves the firm. 8. It affords an easy method for borrowing money for the extension of the business. The following procedure is necessary in the organization of a stock company: (1) Three or more men in a community come together and decide to organize a corporation for carrying on a business such as a creamery. (2) These men solicit subscriptions for the stock, i. e. they seek to interest other men in investing money in the business. These investors are called stockholders. They agree to buy a certain number How a Stock of shares of the stock. (3) It is decided that a Company is certain amount of money is needed to be used in Organized. erecting and equipping a plant and for operating the plant. This is called the capital stock. Three or more persons agree to buy and actually pay for 50% or more of the proposed capital stock. When the stock is paid for, the purchaser receives a stock certificate showing the amount of the capital stock, the par value of each share and the number of shares owned. (4) All the subscribers are then called together for the purpose of forming a permanent organization. At this meeting articles of association are drawn up, blanks being furnished by the Secretary of State. These articles of association give the name of the company, its purpose, the location of the principal office of the company, the amount of the capital stock, the number of shares and the names and addresses of the subscribers. If a cooperative company is formed in Vermont special articles of association are required. (5) When a copy of the articles of association and a certificate of paid up capital are filed with the Secretary of State he issues a charter to the corporation showing that it is legally organized and ready for business. (6) The corporation is managed by not less than three directors who are elected for one year by the stockholders. The directors elect officers from their number and the organization is complete. Par Value is usually The directors elect a manager and provide the necessary equipment. If all of the stock has not been sold it may be disposed of at the value originally agreed upon usually $100 a share. This is the value of each share as recorded on the books of the company and is known. as the par value. $100 a Share Profits are After the enterprise has been in operation for a year there may be profits in excess of the cost of operation. These profits are to be divided among the stockholders or to be carried to the surplus account. Let us assume that the capital stock is $10,000 and the profits are $1000. There has been a gain of 10% and each stockholder will receive as his share of the profit 10% of the par value of the stock that he owns. Suppose a man owns 5 shares at a par value of $100 a share or a total value of $500, he would receive as his share of the profit 10% of $500 or $50. Cooperative corporations in Vermont must "set aside annually not less than 10% of the net profits of the corporation for a reserve fund until there is accumulated a fund of not less than 30% of the paid up capital Market stock." When the creamery has been in operation several years and the reserve fund is fully paid up the business may have developed until there will be a net profit of $2500 or 25% of the capital stock. |