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Basic Life Insurance - Life Insurance-Individual - Life Insurance-Group - Life Insurance-Coverage - Life Insurance-Policies - Life Insurance-Buying - Life Insurance-Principles - Life Insurance-Products - Life Insurance-Beneficiary - Life Insurance-Needs - Types of Life Insurance - Buying Life Insurance - Burial Life Insurance - Get Quotes

Life Insurance History

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily.

Modern life insurance started in late 17th century England, originally as insurance for traders: merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous Lloyd's of London. The first insurance company in the United States was formed in Charleston, South Carolina in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began the late 1760s. The Presbyterian Synods in Philadelphia and New York created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769.

Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. Prior to the American Civil War, many insurance companies in the United States insured the lives of slaves for their owners.

In response to bills passed by in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation.

Life Definition

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured's death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals.

As with most insurance polices, life assurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy.

Insured events that may be covered include:

death,
accidental death

Conditions not covered but which might be insured by forms of insurance or riders on life insurance policies:

need for long term care.
diagnosis of a terminal illness,
diagnosis of a critical illness,
disability due to ill health,
permanent disability.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life based contracts tend to fall into two major categories:

Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums.

Why buy it?

Life insurance provides money for your loved ones, or actually anyone you designate, after you're gone. The person you designate is called the "beneficiary." In particular, life insurance proceeds might be used to pay debt, the cost of the funeral, estate taxes, future college tuition, or any other current or anticipated expense. Life Insurance

Insurance vs. assurance

The specific uses of the term "insurance" and "assurance" are sometimes confused. In general, the term insurance refers to providing cover for an event that might happen while assurance is the provision of cover for an event that is certain to happen.

When a person insures the contents of their home they do so because of events that might happen (fire, theft, flood, etc.) They hope their home will never be burgled, or burn down, but they want to ensure that they are financially protected if the worst happens. This example of Insurance shows how it is a way of spending a little money to protect against the risk of having to spend a lot of money.

When a person insures their life they do so knowing that one day they will die. Therefore a policy that covers death is assured to make a payment. The policy offers assurance on death; even if the policy has a prescribed termination date the policy is still assured to pay on death and therefore is an assurance policy. Examples include Term Assurance and Whole Life Assurance. An accidental death policy is not assured to pay on death as the life insured may not die through an accident, therefore it is an insurance policy. (This set of distinctions does not really apply to United States jurisdictions where both forms of coverage asre called "insurance".)

A policy might also be assured for other reasons. For example an endowment policy is designed to provide a lump sum on maturity. Under certain types of policy the lump sum is guaranteed. Therefore, this may also be called an assurance policy. The test of whether a policy is assurance or insurance is that with an assurance policy the insured event will definitely occur (at some point) whereas with an insurance policy there is a risk the insured event might occur. With regard to Whole Life policies, the question is not whether the insured event (in this case death) will occur, but simply when. If the policy has no forfeiture values (or cash values) then the policy is assured to pay.

During recent years, the distinction between the two terms has become largely blurred. This is principally due to many companies offering both types of policy, and rather than refer to themselves using both insurance and assurance titles, they instead use just one.

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