History Of Life Insurance
At a bakery at Pudding Lane, on 2nd September 1966, a Sunday, a fire broke and spread all over the inner city. This is that very fire known as the Great Fire of London which continued inside the old Roman City Wall and destroyed the city from 2nd to 5th September, 1966 and consuming some 13,200 houses 87 parish churches, the St. Paul’s Cathedral and numerous other buildings of the City. By some luck, it stopped before reaching Westminster district but only after it had consumed many lives and thousands of homes.
The devastating effect of the fire hastened the birth of insurance as we know of today. What was a matter of convenience became a matter of urgency. In fact, some form of insurance was in practice in London itself since the beginning of the seventeenth century. However, that was mainly marine insurance. Life insurance, as we know of today was not in vogue at that time.
Yet, life insurance was not really an unknown concept. A form of it was being practiced back in the 600 AD in Rome. Certain section of the Roman gentry opened up a guild, which not only arranged and paid for the funeral expenses of the members, but also cared for the family of the deceased in various ways. The Guilds in the Middle Ages also served a similar purpose. However, soon other forms of insurance gained more importance. Life insurance on the other hand began to be more or less neglected and that was not without reason. We will come to that by and by.
In the United State of America, the sale of life insurance began in late 1760. More and more life insurance company began to open up, but very few could survive because very few people were interested in life coverage. The first company that opened up could sell only five policies. That was because, the policies were sold for a specific period and if the insured died within the specified period, the beneficiary received the face value of the policy as death benefit. If the insured outlived the policy, they got nothing in return because these policies did not have any cash value.
However as very few people actually die prematurely, most of those who bought life insurance saw that they were not gaining anything out of the premiums they have been paying for so long and so stopped buying life insurance all together. To turn the tide, the life insurance carriers conceived of an insurance policy that offered cash value, which could be taken out by surrendering the policy. Moreover, such policies were valid for whole life of the insured and so whenever, the insured died, his beneficiaries could claim the death benefit. However, such policies had higher life insurance rates. They called the original policy term life and the later edition whole life insurance.
The different types of life insurance are categorized in different ways like.
• Protection policy under which policies providing only death benefit like the term life comes. Then there are the investment policies under which the whole life, universal life, and variable life fall as they provide investment opportunity.
• Another classification is temporary with a specific period validity and permanent policy which are valid for whole life. The term life falls in first category while all others in second.
With profit policies and without/non profit policy are the two categories of investment policies. In ‘with profit policies’ the policy holder gets to participate in the profit of the company by getting a share of profits of the company. Thus if carrier makes a profit the insured earns else he loses money. In the without/non profit policy’, a fixed return in obtained irrespective of the insurance carriers performance.
Therefore, you can see that there is more to life insurance policies than meets the eye. There are different kinds of policies and each satisfies a particular need. Even the term life is not as redundant as it seems. In fact, many experts will advise you to buy term life and only term life if you are buying the policy for insurance purpose. Before you buy a policy, it is imperative that you find out about your own need and then try to find a policy that meets you requirement.
For more great write-ups by David L. on instant term life insurances , click to find out.
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