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“Would your wife like $100,000, or just a tuna casserole?”– Sign seen in a life insurance office.
Life insurance in a very real sense is you betting you will die early, and the company betting you will live. How we got here is interesting:
100 B.C.: Believe it or not, even before Jesus died on Calvary’s cross, you could buy a type of life insurance in ancient Rome. Roman Burial Clubs, formed by Caius Marius, would help cover funeral expenses when another dies. It was believed that improper burial would result in an angry evil spirit, so it was seen as good for society and helpful to families.
1583: Richard Martin purchased the first recorded insurance policy on his friend, William Gybbons. This one-year term policy was purchased by Martin for 30 pounds, and he received a death benefit of 400 pounds after Gybbons died within that year.
1620: Captain John Graunt creates the first mortality tables who used the average lifespans from church records as his basis for this early actuarial work.
1688: At Edward Lloyd’s Coffee House in London, ship captains, ship owners and merchants would help give birth to marine insurance. The proposal for insurance would be placed on a table and any insurance man who wanted to insure a portion of the risk would sign indicating the amount of the total risk he would accept. This was the origin of the word “underwriter” as the insurer would sign his name under the proposal for insurance. A group of professional underwriters eventually established the New Lloyd’s Coffee House, which would become the modern Lloyd’s of London.
1706: The Amicable Society for Perpetual Assurance becomes the first company to offer life insurance.
1759: Presbyterian Ministers Fund for Life Insurance was the first life insurance company in the United States and provided benefits to the widows of Presbyterian preachers and is still in existence.
1762: The Society for Equitable Assurances on Lives and Survivorship used age-based premiums based on the mortality rate laying the basis of modern life insurance.
1770s: In England, a concern that life insurance was basically gambling arose as people had taken out policies on the lives of perfect strangers. It is reported that a quarter of all bets in one gentleman’s club was on the death of a third party, compared to only 2.5% on horse races. It is said that people would hear that a person might hear that man was wanted for murder and folks would rush to buy life insurance on the suspect to bet on his death by hanging. More commonly, a prayer request for a terminally ill Aunt Vera might result in multiple policies on her life the next day.
1774: The Gambling Act, still in force in England today, required claimants to have a legitimate financial interest in the life of the insured to prevent the “mischievous kind of gaming” that had arisen and declared all other insurances on human life “null and void, to all intents and purposes whatsoever.” After 1774, it was only legal to collect on an insurance policy if a person (typically a wife or child) relied on the insured for income or was a creditor who stood to lose if the insured died before the debt was paid.
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1868: The Ancient Order of the United Workmen fraternity provided members with life insurance protection for their dependents.
1878: The Blue-Eyed Six conspired to insure their elderly neighbor, the poverty-stricken Joseph Raber, for a total of $8,000 (over $250,000 in today’s money). The men told the insurance agent that they had agreed to take care of Raber for the rest of his life and wanted the policy to cover his eventual burial expenses. They had someone drown Raber. Everyone suspected foul play, but it was only when an eyewitness to the murder emerged, that the six men were tried, and five hanged.
1911: Group life insurance was born when Equitable Life Assurance Society (now AXA Equitable) wrote a policy covering all 125 employees of a leather company without requiring individual applications or medical exams. In 1912, Equitable began insuring employees of Montgomery Ward.
1930: Life insurance sales rose dramatically after World War I, peaking at $117 billion of insurance in force in 1930. By the eve of the Great Depression, there were more than 120 million life insurance policies — equivalent to one policy for every man, woman and child living in the United States at the time.
1976: The end of World War II and the economic boom that followed boosted sales of life insurance in the United States and over 90% of all husband and wife households had some form of life insurance by this time.
2001: More than $1.2 billion in life insurance claims are paid on the 2,977 deaths caused on 9/11.
2010: 30% of U.S. households (35 million) had no life insurance protection at all, and only 44% of U.S. households had individual life insurance, marking a 50-year low for the life insurance industry.
Life insurance is not for the dead, but the living left behind.