What is Life Insurance and how did it originate?
Life insurance is one of the oldest types of insurance on the market. Life insurance cover is a plan, where in the event of the death of an individual who is covered with a life insurance policy, a sum of money will be paid out to another individual, normally referred to an insurable interest, unless the cover has been put under trust then it would pay out to the trustee. Originally, an association of a number of individuals were formed of all age groups and a sum of money was collected by each individual, giving the same amount of money into the pot. Subsequently that money was then invested and at the end of every year the sum of money was then divided by the survivors, thus leaving the last remaining survivor with a whole year’s interest plus the lump at the end of the year. However, as the amount that people wished for the sum of money to increase by it was then a greater risk as well as the likeliness of any violent attacks made on any of those involved. Since this is was then necessary that a law be made to support this particular situation, of which is how the actuarial practice formed. An actuary is an individual employed by insurance companies to calculate the monthly premiums by taking all the risk factors into consideration from which they obtain from previous experiences such as the companies claims history along with any other statistical data from the market.
The reason for having life insurance is to protect your family against any misfortunes, the cover does this by protecting any outstanding debt and then any additional amount of money you wish to secure your families well being, all of which would be discussed when taking out the policy as the sum assured of your plan. Typically the cover is there to assist any beneficiaries in the event of your death and also goes beyond any funeral costs etc as the sum assured should be enough to cover your family for the loss of future income, if you are the breadwinner of the family as this will therefore have a huge effect on the lifestyle of any of the family members who you support. When taking out life insurance it is known that this is a delicate task and which could also be uncomfortable for the applicant as no one likes to think about when they will die, but there is always the obligation that you should protect the one’s closest to you.
The market has changed since the development of the insurance industry and the reasons as to why people take out life insurance have also changed for example the most familiar reasons:
- Income Replacement
- Payment of Outstanding Debt
- Final Expenses
- Education Funding
- Emergency Fund
- Special Needs Child
- Business Continuation
- Business Insurance
- Estate Taxes
Equalizing Inheritance.
Life insurance is avidly reported as being one of the oldest types of insurance coverage on the market. People typically tend to obtain this form of coverage in order to be able to leave an adamant amount of money behind for their families in order to cover expenses. These expenses include funeral expenses, outstanding debts, and providing money for family’s expenses after the main breadwinner has passed on.
A life insurance policy is clearly defined as a plan of coverage that is given for a particular amount. The person that obtains this coverage is considered to be later referred to as the insured, while the company or agency that renders the coverage to the insured is considered the insurer. The insured will be the person that is paying a certain amount of money into the policy, while the insurer has agreed to pay out a predetermined amount with the insured if they should pass on.
The origins of life insurance can be traced back 4500 years earlier than the present day. Life insurance is reported to have begun in ancient Rome and quickly began to span all across Europe within the 17th century. After conquering Europe, this form of coverage than set its sights on going further and was later adopted by the America’s and practically everywhere else around the world.
In the beginning of the dawn of life insurance the practices were performed in a different manner. A group of people would come together in the beginning of every year and figure out a payment amount which they would render into a large sum. After the amount had been figured out, the people within the group would pay their monthly premiums, so to speak. At the end of the year the money would be divided amongst the survivors.
As the fascination with this practice began to catch on to different groups of people, the way that life assurance was issued began to quickly change. Even though, the practice of how we obtain life insurance in modern day society has changed, the main principal behind the insurance coverage remains the same. A lot of people tend to think of life insurance as a blanket of securities that can be used to provide for the people that they love after they have passed on.
In fact, some of the main reasons why so many people desire to obtain life insurance coverage are not for themselves. They wish to obtain this coverage, for what they are going to leave behind once their time on earth is done. Its human nature to wonder the what if’s in life. No one can accurately pinpoint their time of death; therefore life insurance coverage can be there for you to make up the time that you could not stay.
Life insurance is a business that is based on risks. Every day we encounter risks and none of us know what the outcomes of those risks are going to be until they pan out. Life insurance has a strong history and it has an incredibly interesting origin. Life insurance meant a lot to our ancestors in the past, and should still mean the same amount if not more to all of us in the present.
