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History of Life Insurance
Although it makes evolutionary sense to fear and run from death – the recognizing and accepting of mortality is one of the most important steps humanity ever took in creating modern civilization. Risk protection has been a primary goal of humans and institutions throughout history. Protecting against risk is what insurance is all about.The first historical record of what we know as life insurance came from ancient Romans in the form of ‘Burial Clubs.’ Romans believed that in order to avoid being a tortured ghost, one had to be buried ‘properly.’ This meant extravagant measures to create elaborate ceremonies that honored the life of the dead. To meet these high standards, common citizens would join a ‘burial club’ and regularly financially contribute to the club. When a member would die, the club would finance his burial and in some clubs, even give the family of the deceased a stipend.
Modern life insurance, where the insurer insures for monetary purposes was born in 17th century England. Underwriters would meet at public coffee houses and discuss creating policies for traders like merchants and ship owners.
In the United States, the first form of life insurance available came from Presbyterian Synods in Philadelphia and New York. They established the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759. Episcopalian priests followed suit and began a fund of their own in 1769. In the period from 1787 to 1837, over twenty new life insurance companies were started.
In 1835, the infamous New York fire drew people’s attention to the need to provide for sudden and large losses. Two years later, Massachusetts became the first state to require companies by law to maintain such reserves. The great Chicago fire of 1871 further emphasized how fires can cause huge losses in densely populated modern cities. The practice of reinsurance, wherein the risks are spread among several companies, was devised specifically for such situations.
With the creation of the automobile, public liability insurance, this first made its appearance in the 1880s, gained importance and acceptance.
More advancements were made to insurance during the process of industrialization. In 1897, the British government passed the Workmen’s Compensation Act, which made it mandatory for a company to insure its employees against industrial accidents.
During the 19th century, many societies were founded to insure the life and health of their members, while fraternal orders provided low-cost, members-only insurance. Even today, such fraternal orders continue to provide insurance coverage to members as do most labor organizations. Many employers sponsor group insurance policies for their employees, providing not just life insurance, but sickness and accident benefits and old-age pensions. Employees contribute a certain percentage of the premium for these policies.
While the thought of losing a loved one can be very uncomfortable, term insurance is something that is needed. The emotional and mental trauma of losing a family member can be draining in every way and at least a life insurance policy eliminates any added financial stress. Choosing to purchase life insurance is because you love someone. Think of it as the ultimate act of selfless love. The death benefit proceeds of a policy could benefit your loved ones for many years after you are gone.
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