Excerpt from The Coast Review, Vol. 21: A Monthly Journal, Devoted to Fire, Marine, Life and Accident Insurance; January, 1886 This brings us to the consideration of the first or fundamental principle, upon which all life insurance must be based, i. E., that the payment by each individual in a given time shall be proportional to the risk that the company sustains Of having to pay a claim by his own death in the same time. To estimate the value or cost of this risk we have recourse to the law of probabilities as applied to vital statistics, tabulated so as to show the number living and the number dying (out of a given number), at each age, until all shall have died; such tables are known as mortality tables. That known as the Americrn Experience Table is in most general use, and it is the one to which refer ence will be had throughout this article; by reference to that table we find that of persons living at the age of ten years there are: The probability that a certain event may occur, is (in order to be the subject of math emetical examination) represented by a common fraction having for its numerator the number of chances to happen, and for its denominator the entire number of chances which may or may not happen; thus, if we have ten marbles in a bag, seven white. And three black, the probability of drawinga white marble is represented by the fraction 7-10 or the decimal 7, and the probability of drawing a black one by the fraction 3-10 or the decimal 3; in like man ner we would find the probability of dying within one year at age twenty-five, by divid ing 718, the tabular number dying at that age, by the tabular number living at the beginning of the year, and this gives us the decimal 8065, or about eight chances in one thousand; so also the probability of dying within a year at age 75 is found to be (by dividing by or about 9} chances in 100. This law of mortality, as it is called, is the fundamen tal basis of all life insurance calculations, and our selected table of mortality must be assumed to be correct since it is this, and the assumed rate of interest to be realized, which determine the equitable amount to be collected from each person belonging to the association; in the case of an assess ment company, into whose calculations the question of compound interest does not enter, the process is quite simple, the whole amount to be paid in any one year being divided by the number Of persons who have to pay it, in proportion to the probability of dying at each age. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.