Excerpt from The Three Systems of Life Insurance: Embracing I, the Level Premium System, II, the Natural Premium System, III, the Assessment System

The first edition of The Three Systems of Life Insurance was prepared by the late Mervin Tabor, at one time actuary of the Illinois Insurance Department, and issued in 1885. So warm was the reception accorded the work on account of its being written in a manner so clear and concise, as to ap peal to the public at large, that it speedily ran through several large editions, The Spectator Company having meantime pur chased the copyright and electroplates, on the death of Mr. Tabor, and the work having since been issued under its aus pices.

In this, the eighth edition, the publishers have caused the work to be carefully revised in accordance with the principles of modern life insurance practice. Inasmuch as the division of life insurance under three systems, as laid out by Mr. Tabor, has not undergone any material change, the same division has been followed in the current edition. The lead ing system is, of course, the level premium or old line, under which premiums remain fixed as at age of entry, a larger amount than is absolutely necessary being collected in the earlier years in order to avoid increasing the cost in later years when the increased number of deaths causes a larger drain upon the funds. The natural premium system is equally as scientific as the level premium, differing only by collecting for each year the actual cost as indicated by the mortality tables, which implies steadily increasing premiums. The as sessment system merely aims to collect from year to year an amount sufficient to pay the claims actually incurred during that year; no provision is made for increasing cost, and, as a result, the assessments increase after a few years, both in number and amount to the great dissatisfaction of those hold ing assessment policies.

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