As you may know by now, September is National Life Insurance Awareness Month (LIAM). Although the concept of life insurance has been around much longer, the idea of devoting a whole month to bringing awareness to life insurance was created by Life Happens 20 years ago, and they have been championing it ever since. In our article this year, we will be talking about the history of life insurance and discuss some current statistics. If you were hoping for a more comprehensive article defining life insurance, a few types, and who needs it, please read our article from last year's Life Insurance Awareness Month.
A Brief History
1750 BCE - Hammurabi's Code
Where you decide to start the history of Life Insurance is up to interpretation. One of the earliest and most complete written legal codes can be found on an ancient Babylonian monument. This monument is known as Hammurabi's Code and contains 282 laws, establishing standards from commercial interactions to matters of justice. Included in those 282 laws is one that provided basic insurance for any hardship (inability to work, death or flooding) that made repaying debt impossible.
600 BCE - Benevolent Societies and The Casket Kitty
In ancient Greece and Rome, come citizens formed guilds called "benevolent societies". These cared for the families of deceased members and would aid in the paying of funeral expenses. Another similar form of "life insurance" was the concept of a "Casket Kitty" in which people contributed a small sum every week to be later used for funeral expenses.
100 BCE - Gaius Martius & Burial Clubs
The history of life insurance as we know it today began in the ancient Roman military. Gaius Marius, a Roman general, is attributed with the idea of "burial clubs". The idea was that surviving soldiers would pay for one another’s funeral expenses should a member die in war. Originally only used in the military, the idea quickly became popular among ordinary citizens as well. Proper burial was important to the Romans, as they believed failure to do so would result in a miserable ghost.
1583 CE - William Gybbon & Richard Martin
While there may have been a formalized and written life insurance policy that precedes this one, this document is the oldest physical proof. In 1583, an insurance policy was purchased by Richard Martin for 30 pounds sterling promising that if Willam Gybbon died within one year, he would receive 400 pounds.
1688 CE - Lloyd's of London
In 1688, Edward Lloyd's coffeehouse was a popular meeting place for chip captains, owners and merchants. It became a place where you could learn the latest shipping news and eventually the marine and trading industries were underwritten by members of the Society of Lloyd's (later Lloyd's on London). Later, in 1974, the Society of Lloyd's merged business with the royal exchange, solidifying it's reputation. Also in 1774, the Life Assurance Act was passed in Great Britain to protect clients from corrupt insurance agents.
1759 CE - Presbyterian Synod of Philadelphia
The first life insurance company in the United States began in 1759. It benefited Presbyterian ministers and their dependents. The Episcopal church followed suit a decade later. There were, however, many legal restrictions that limited the scope of the industry and the insured were subject to health and character checks.
1837 CE - The Panic of 1837
The Panic of 1837 was a financial crisis in the United States that lasted until the mid-1840s. During this time, insurance companies were not able to raise enough capital to form stock companies. This led to the creation of "mutual companies". New York Life, MassMutual, John Hancock, and MetLife all formed during this time period.
1911 CE - Pantasote Leather Company
The first group life insurance policy was written by Equitable Life Assurance Society (now AXA Equitable) covering the 125 employees of Pantasote Leather Company. They did not require individual applications or exams and soon developed an entire department dedicated to group coverage.
1930 CE - World War I Aftermath
We know that the roots of modern life insurance began with the military, so it should comes as no surprise that World War I and it's aftermath led to a huge increase in policies. By 1930, there were more than 120 million life insurance policies, equal to the number of people living in the United States at the time.
1965 CE - Serviceman's Group Life Insurance
Serviceman’s Group Life Insurance was enacted into law to provide life insurance to members of the armed forces on active duty. The federal government pays the extra cost of insuring the inherently high-risk of active military service.
1976 CE - Post World War II Economic Boom
The end of the second world war lead to an economic boom in the united states. By the mid-1970s, 72% of the adult population of the United States and more than 90% of all husband and wife families owned a form of life insurance.
Today - COVID 19 & Technology
The COVID-19 pandemic and new technology has changed how life insurance is purchased. Companies rely on big data to support clients' growing desire to apply for and purchase insurance online.
Statistics from Today
History shows that many people are reactionary. We all have plenty of demands on our time and finances, so sometimes it takes tragedy such as war or pandemics to force our hand when it comes to difficult subjects.
There is a common misconception about the use of life insurance. Studies have shown that a large percentage of people think that it is a way of paying funeral expenses. While it is certainly used for that, a properly implemented can help to offset the financial hardships associated with losing a primary wage earner.
Having a full financial plan in place is a great place to start if you want to feel financially secure. Life insurance is usually one aspect of a holistic financial plan.
Life insurance is more affordable than most people think. If a barrier to purchasing life insurance is cost, it may be the right time to contact your trusted financial professional.
Reasons People Buy/Don’t Buy Life Insurance2
Why People Buy
Why People Don't Buy
Covering the costs of funeral expenses is not a small sum, but a life insurance policy should help to protect your loved ones from the loss of income. Leaving an inheritance is admirable but that mentality may lead to people thinking robust life insurance policies are not financially feasible. Having an employer sponsored life insurance is wonderful, but they are seldom going to cover everything that you would need and are not tailored to the individuals needs.
As far as the reasons people gave for not buying life insurance, the number one reason is cost. As we discussed earlier, people tend to overestimate the cost of life insurance by 3x. Speaking with a financial advisor will give you a much better idea as to the cost of life insurance and the amount you may need. It is understandable to be concerned with other financial responsibilities. A financial professional will be able to assist you with making decisions about how much of your finances should be allocated to which resources.