better adjustment in case of partial loss than the insured, who is unfamiliar with such matters. They are the agents of the insured. When the amount of loss is not in dispute their services are of course not required.

In case of a total loss the insured collects only the value of the property irrespective of the amount of the policy, but some States1 have statutes compelling full payment of the amount of the policy.

537. Assignment of Policy.-The contract of insurance is a personal one, and cannot pass to another without the consent of the insurer. After a loss occurs there is a vested right in the insured to the indemnity, which right is assignable without the consent of the insurers. The policies very commonly provide that an assignment of either the property or policy will avoid it. It has been previously observed that the insurable interest must exist throughout the life of the policy. (See sec. 525.) When one transfers the property he is not damaged by its loss, hence the insurer is not liable.

When one purchases property on which there is insurance, the policy should be immediately assigned, and the consent of the company obtained, or new insurance should be procured if it is expected to keep the property insured. When property is sold on which there is insurance, there is no implied contract that the policy shall be assigned as a part of the consideration. The seller may cancel the policy and take its surrender value.

A has a house on which there is a policy for $5,000, having two years yet to run. He sells the house to B, who pays the purchase price and takes possession. Nothing is said about the insurance, and in ten days after the transfer the house burns. The company is not liable to either.

Death is not such an alienation of the property as to render the policy void; neither is a mortgage of the premises a sale of the property in this sense, but the insurance companies are careful to provide against cases of the kind.

538. Surrender of Policies.-The ordinary policy provides that it may be canceled at the option of either party. When canceled by the company they retain only so much of the premium as has been earned, but if canceled by the insured, then a larger per cent of the premium is retained, and the remainder returned. This is to prevent one who wishes a short term policy from taking a long term at the cheaper rate and then canceling the policy at the end of the short

term.

1 Ohio, Massachusetts, Nebraska, Missouri. See N. E. Rep. 962.

539. Representations.-Often there is a written application made for insurance. A statement made either orally or in this application, if not a part of the policy, is called a representation. If these representations are material to the risk, and are false and fraudulent, the policy will be void. A concealment is the converse of a representation, but if the fact is material to the risk it should be communicated to the insurer.

540. Warranties.-A warranty differs from a representation in that the former is made a part of the contract. It operates as a condition precedent, and if broken there is no contract.

541. Insurance by a Mortgagee. It has been held in a number of cases in Massachusetts, that when a mortgagee takes out a policy of insurance in his own name, paying the premium himself, and a loss occurs before his debt is paid, he can recover for the total loss and still have a right to recover his whole debt from the mortgagor. If the debt has been paid, he of course sustains no loss, and the company is not liable.

The case would also be different if the policy be taken by the mortgagor for the benefit of the mortgagee, as his interest may appear.

CHAPTER XLV.

LIFE INSURANCE.

542. Importance.-Life insurance has become very popular in this country. It is said that a certain prominent business man carries nearly a million dollars of insurance on his life. Not only is it popular among the rich, but among other classes as well. It is taken not alone for the protection of those dependent on the insured, but as an investment as well.

543. Definition.-Life insurance is a contract whereby, for a consideration, one party agrees to pay a certain sum of money to another when a certain person dies or reaches a certain age.

There are three parties to the contract: The insurer, the one whose life is insured, often called the life-insured, and the person to

whom the money is to be paid, called the beneficiary. Sometimes a person takes out insurance on his own life, and has it payable to himself or to his "estate." In the latter case it is payable to his legal representatives. In most states the creditors of the insured have no claim upon the insurance that is payable to any one except to the estate of the insured.

544. Insurable Interest.-There must be an insurable interest in the life insured to effect a valid insurance. One of course has such an interest in his own life, and a creditor has such an interest in the life of his debtor as to enable him to insure it upon his own account, but the interest does not extend beyond the amount of the debt. A partner may insure the life of a co-partner. Every interest one may have in the life of another is not insurable, it must be a direct pecuniary interest. A child, if dependent on a parent for support and education, has such an interest, and a parent, if dependent on a child for support, is entitled to insure it. This insurable interest differs from that in fire insurance, in that it is sufficient if this interest exists at the inception of the policy, while in fire insurance, as we have observed, it must continue throughout the life of the policy.

If the life of a debtor is insured by his creditor, and the debtor dies, the question arises whether, after the receipt of the insurance, the creditor can still claim the amount of his debt. It is a well settled rule that he can. If the policy had been taken out by the debtor, and made payable to the creditor, as collateral, the rule would of course be different.

545. The Beneficiary.-When one takes a policy on his own life, and makes it payable to another, that one, though it may be unknown to him, acquires such an interest in the policy that it cannot be controlled or changed without his consent.

546. Application.-A formal, written application is usually made for a policy. This application, among other things, gives the name, age and residence of the life-insured. The company has an examining physician, who makes a medical examination of the person. Not only is a personal examination made, but answers must be made to a long list of questions affecting directly or indirectly the risk. These answers are taken in writing, and on them, as well as on the physician's examination, the company bases its acceptance of the risk.

These questions relate to the habits of the party to be insured, also to the kinds of disease with which the party has already been afflicted, and to the longevity of his ancestors and near relatives. The answers should be made in perfect good faith, for they become warranties, and on their correctness depends the validity of the policy. They are usually incorporated in the policy and become a part of it.

547. The Policy.-As in fire insurance, the policy is the contract, and reference must always be made to it for its provisions. The forms and provisions of different companies vary somewhat. These policies quite frequently contain a provision that the party insured must not remove to or travel in certain regions where the death rate is high, or engage in certain extra hazardous undertakings, under penalty of forfeiture of insurance. The policy also contains the amount of premium paid or to be paid, also the amount of insurance, to whom payable, and the name of the party insured.

548. Assignment.-Policies usually contain provisions in reference to their assignment, and when they do the provisions are binding. It is no uncommon thing for policies to be assigned, to give security to a creditor. Notice and assent are usually required to give effect to an assignment. A delivery for the purpose of assignment has been held good as such, without any writing. But there must always be a delivery. The better method is to endorse the policy and then secure the assent of the company.

549. The Premium.-This is the consideration paid, or to be paid, for the insurance. It may be a gross sum, or it may be so much annually, semi-annually or quarterly. In mutual companies the premium depends upon the losses, an assessment being made on the members in proportion to their insurance. The rate of premium depends upon the age of the person insured. Great care should be used to pay the premium promptly when due, for many policies are avoided by negligence in this regard.

550. Kinds of Companies.-There are, as in fire insurance, a number of different kinds of companies. The business is almost, if not quite, universally done by corporations. Fraternal organizations often include an insurance feature. These organizations are usually mutual, and have no capital stock or security to the policy holders beyond the moral certainty that the members will pay their assess

ments. In a mutual company a policy holder may withdraw at any time by failing to pay his assessment.

551. Plans of Insurance.-There are innumerable plans for insurance, plans that differ in the details, but it is our purpose to mention only some of the most common. In the first place a policy may be participating or non-participating. In a participating policy the holder shares in the profits of the company derived from certain sources. A prominent company, in a recent report, states these sources in its case as follows: "The dividend surplus arises first, from the difference between four per cent interest on our invested assets and the higher rate received; second, from the difference between the death losses sustained during the year and the expected losses shown by the tables; third, by the difference between the margin which is added to the net premium to meet the expenses of conducting the business and the actual expenses incurred." This profit may, at the option of the holder, be taken to reduce the annual premium, or it may be retained by the company as premium for the purchase of additional insurance, or if the policy be paid up it may be received in cash annually. A non-participating policy has none of these features.

552. Plans Continued.-An ordinary life policy is one in which the premium is paid annually, or otherwise, during life, and the insurance is payable at death. There are also policies wherein the premium is to be paid for a certain number of years only, and the insurance is payable at death. If the premium be paid for the number of years specified the holder is then said to have a "paid up policy." There will be nothing more to pay on it, and if it be a participating policy the holder may receive annually a cash dividend on it. This is one of the policies that have a commercial value.

553. Endowment.-When investment is a prominent feature of the plan, an endowment policy is usually taken. By this plan the premium is to be paid annually for a certain number of years, and the insurance is to be paid at the end of a certain number of years, or at prior death. By this plan the party insured has hopes of receiving the insurance himself. The plan is sometimes adopted when it is expected that a fund will be required at a certain time for a certain purpose, such as the education of a child.