Life has many uncertainties. You could be at the top of your game one day and unable to earn a living the next.
People needed some sort of guarantee that their future would be secure – a way to ensure their legacy. And so, the concept of life insurance was born.
Life insurance policies have changed in many ways before they became what we know today. From the earliest burial club to modern life insurance programs, this blog will take you through its evolution to better understand the meaning of life insurance for you and your future.
100 B.C.: Roman Burial Clubs
What is life insurance to you? For Roman military leader Caius Marius, it is a burial club that provides for the funeral expenses of every comrade who passes away unexpectedly.
In ancient Rome, burial clubs served as organisations that provided financial support to ensure their club members got honourable burials to prevent them from becoming unhappy ghosts.
This practice didn’t face much resistance because everyone – even the military and the government – agreed that each individual must be properly buried, regardless of social or political standing.
In time, the burial club later expanded their coverage to give the surviving family of the deceased financial support.
Unfortunately, burial clubs disappeared after the Roman Empire fell in 450 A.D.
17th Century: Maritime Insurance and Coffee in the U.K.
Millennia later, the concept of insurance was able to continue in the form of maritime insurance, which started in a humble coffee shop on Tower Street in London.
In 1688, Lloyd’s Coffee House – an establishment in London owned by Edward Lloyd – served as a gathering place for ship owners, ship captains, and merchants to get the latest news in the shipping and maritime industry.
Later on, Lloyd’s became the birthplace of marine insurance and the first-ever modern concept of insurance. It was later renamed “New Lloyd’s Coffee House” and was run by a group of professional underwriters in 1769.
And that is how Lloyd’s of London – the so-called foundation of insurance – came to be.
But the crew at Lloyd’s weren’t the only ones making waves in the then-very young insurance industry.
In 1662, another Londoner named John Graunt unearthed a pattern of the longevity and death of individuals in defined groups. Then, one generation later, astronomer Edmond Halley developed the first mortality table that links average lifespans to life insurance in 1693.
18th Century: Religion and Life Insurance in the U.S.
The insurance industry continued to grow in Great Britain. It got to the point that it was large enough to merit attention from the Parliament. The legislative body enacted The Life Assurance Act of 1774 to prevent abuse, requiring beneficiaries to have a financial interest in the life of the insured.
Meanwhile, the first insurance company introduced life insurance in America in 1760 by an insurance company in Charleston, South Carolina. This happened just a year after the Presbyterian Synod of Philadelphia introduced the concept to their Presbyterian ministers and their dependents in 1759.
However, not everyone sees life insurance as a legitimate financial decision at the time. Some clergymen considered and criticised it as a form of gambling.
19th Century: Panic and Depression
During the Panic of 1837, life insurance finally took off.
The expansion of women’s rights and other cultural changes paved the way for people to see insurance as less a form of “gambling” and more of a potential investment opportunity.
This and the emergence of mutuals that required only a small initial capital caused the life insurance industry to grow in the next few years – at least until the Great Depression happened.
From 1871 to 1874, a total of 46 life insurance companies halted operations, with 32 failing completely, resulting in $35 million in losses for policyholders.
Then, in 1875, an important development occurred. New Jersey’s Widows and Orphans Friendly Society started offering one of the earliest types of life insurance – burial insurance – for the first time to the working class. That organisation is still present today and has become a Fortune 500 company named Prudential.
20th Century: Whole, Term, and Variable Life Insurance
From the 20th century, different types of life insurance were developed to cater to the varying needs of policyholders.
For instance, the history of whole life insurance that was most prevalent between the 1940s and 1970s highlighted how it could subsidise your retirement planning or a secured income for your loved ones in case of untimely demise.
Then, the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 was passed, making several banks and insurance companies interest-sensitive.
Over time, people started questioning why they should put money into whole life insurance instead of investing in the high-revenue stock market and taking on term life insurance to protect their families.
With this and several other factors, the variable universal life (VUL) insurance was introduced down the line.
This permanent life insurance policy comes with a savings component on top of the traditional death benefit. This is one of the modern insurance policies that provide working adults with smart saving options, giving them more control over how they want to invest their money.
Protect Your Future
Getting life insurance is a decision based on past data that is made at present to protect your future. By learning about the evolution of life insurance, we gain a deeper understanding of the value it can introduce in our lives.
Protect your future today the Hayah way. Talk to us to learn more about how we can help you secure the future for you and your family.