The biggest worry in everybody’s mind always is ‘what will happen to my family behind me?’ The question looms large, especially in the family’s bread earner’s mind. It doesn’t matter for a dead person how is his family surviving because whether they are in good financial status or poor, he can’t do anything. But such is the mind of a human being that he always cares about his family that he wants them to do well even after him.
Destiny is such a strange player that one never knows what will happen next moment. Everyone wants his family in economically secure conditions, and he does all that he can. It is quite natural for one to think about his family as a top priority. Nothing can compensate for one’s life, which can only be slightly taken care of by securing a family’s wealth. What surprises me more is the passion of human beings towards life, but we cannot blame them because life is very beautiful.
Seeing this passion of human beings towards life and their effort to secure their family’s life, the concept of life insurance came forward. This is an easy way to protect your family from a financial crash. The history of the origin of life insurance is very interesting. Very few people may know that the history of life insurance is dated back to the Roman empire, and Lloyd’s of London started it at a coffee shop.
Ancient Rome, 100 B. C. is supposed to be the origin of the life insurance concept. This was initiated by Caius Marius, a military leader, who started to fund the funeral expenses of troop members in case of the death of any member. This idea of the club was duplicated in many places. There was a belief in Romans that if the body were improperly buried, it would turn into an unhappy ghost. Therefore all the expenses were shared by fellows to ensure the proper funeral process was followed. For the same purpose, clubs were embraced by the army and government. The ritual continued till the existence of the Roman Empire, but once it fell in 450 A.D., it eventually stopped.
Edward’s Coffee Shop:-
Another existence of the concept was in 1968 at Edward Lloyd’s Coffee House at Tower Street. This was a famous place for the ship captains, merchants, and ship owners to gather along with other spots. This was the real place where the modern concept of life insurance came into existence. In 1759, some professionals grew the coffee shop into Llyod’s of London by establishing New Lloyd’s Coffee House.
First Life Insurance Corporation:-
The first-ever Life insurance corporation came up by Presbyterian Synod of Philadelphia in America. The year was 1759, and the corporation was for the benefit of Presbyterian ministers and their dependents. A decade later, a similar fund was organized by Episcopalian ministers. It must be noted that the first insurance company in 1735 only offered fire insurance and not life insurance till the year 1760.
The unfortunate financial crisis in 1837 made it clear that one needs to secure wealth so that one must get help in the crisis and after the death of a person. The thinking of mutualization of life insurance became strong post-crisis, and from 1838 to 1849, 17 mutuals that needed little initial capital were introduced against only one life insurance company.
As the importance of life insurance was understood among the front-line males, it was essential that it would cascade to other segments, mainly women. Life insurance, which some society’s enemies portrayed as gambling, started to move away from their hands and drifted to other segments. This led to a big hike in life insurance purchases and was finally accepted as a family need. This was when big players like MetLife, New York Life, MassMutual, and John Hancock came into existence and are still going strong.
The years between 1871 to 1874 saw the complete downtrend of almost all the insurance companies, of which 46 stopped their operations, and 32 failed badly. This resulted in a huge financial loss of $35 million for policyholders. However, 1875 saw a good turn as Widows and Orphans Friendly Society came up with a single product, burial insurance. This was the first time that the working class of America was considered as the beneficiaries. The company, over some time, became Prudential.
Group Insurance Concept:-
AXA Equitable, in 1911 (then Equitable Life Assurance Society), introduced the group life insurance concept by covering all 125 employees of Pantasote Leather Company. This was done without any individual application or medical exams. By forming a promotional section within, Equitable in the next year covered insurances of employees of Montgomery Ward.
Post World War:-
It was no surprise that post World War I, in 1930, life insurance sales were at their peak. And clocked to $117 billion. It soon reached 120 billion (every man, woman, and child) till the eve of the Great Depression in the United States.
To enroll the people like armed forces on national duty life insurance was embraced into a law. The high risk at military duty was considered paramount, and the extra cost was paid by the administrative department of the federal government. This was 1965, which saw the life insurance coverage for armed forces members through enactment into law.
World War II:-
Post World War II, an economic boom helped increase sales of life insurances in the United States. So much so that between 1972 and 1976, around 90 percent of families and overall 72 percent of the adult population opted for at least one kind of life insurance.
Infamous Terrorist Attack:-
Family members of around 3000 people who died in the Sep 11 attack were benefitted with the total amount of $1.2 billion; it is estimated as per the reports.
We now will discuss how life insurance impacts modern-day life in reality. Whether all types of deaths will cover what life insurance is about? Are there any limitations on the types considering the misuse of the coverage? We will see that all in the below segments.
Having understood the history of life insurance, we can conclude that the concept was adapted for different reasons, but money is common. The main purpose of modern life insurance is to provide an amount of money in case of sudden accidental death or as a lifetime pension. The concept revolves around helping the deceased family or providing life coverage to the entire family while they are alive. The only question is how long the benefits last and whether the fund is sufficient considering the inflation rate we are going with?
Well, unfortunately, the answer is no. Even if the deceased family gets a lump sum amount on the sudden death of the insurance holder, how long can the family survive with that? Not forever, for sure. But then, some people have the thought process of ‘at least they will get some benefit through the insurance. Something is better than nothing.’ Yes, indeed, they can at least go along for a few months in which they might look for other sources of income.
Insurance Policy Conditions:
As we all know, the final decision of payout in case of the policyholder’s death solely belongs to the insurance provider company. It is their responsibility to check and confirm there is no foul play behind the death of a person. To be precise, insurance benefits are mainly allotted to natural deaths and accident cases. A death comes under a scanner if the company suspects malicious activities behind the purpose of death. They have the right to investigate in their way before releasing the fund to the family.
Here happens the first hurdle as even in case of natural death, the release of the fund may get delay because the company adheres to the rules.
Types of Deaths that are Covered By Life Insurance Policy:-
In the case of deaths due to heart attack, cancer, kidney failure, an infection, old age, and similar natural causes, beneficiaries will receive a payout.
Payout is released to beneficiaries only if it is proven that the beneficiary is nowhere connected with the murder. This might go a long way till the investigation is over.
Only if the ‘contestability period’ (first two years) is over will the amount be released to the beneficiary. This again is similar to murder criteria because there must not be involvement of the beneficiary in the suicide directly or indirectly.
The cases of accidents like accidental drug overdose, motor accident, drowning, poisoning, or another mishappening will be considered as accidental deaths, and the amount will be released.
We know best about till due to recent pandemic. Death because of pandemic illness has been treated as natural death, and the beneficiary will get the due payout. However, if the insurance is purchased to get benefits while suffering from such an illness, it will be invalid.
Accidents and deaths that Life Insurance Policy does not cover:–
If you involving in risky activities prone to major injury or death, your insurance company is not bound to release the pay-out. The category of risky activities broadly consists of
Mountain and rock climbing
Apart from the above, there are some jobs you owe the risk of life, such as pilot, offshore fisherman, logger, underground miner, offshore rig worker, etc.
However, the above things will include in the insurance if you inform the insurer, who will then make an exclusive clause to embrace these activities. But you will need to pay a heavy premium to get included based on the risk factor involved.
Some other things deny one of the benefits of life insurance, and those clauses are as follows–
Family health history
Alcohol and drug use
Not naming a beneficiary
Not to mention that even if your intent is pure but not aware of the above conditions, your beneficiary may end up in trouble if the insurance is not properly planned. It is very important to read and understand or discuss all the pros and cons with the insurance agent. Usually, you won’t face issues if you hire an agent, but it is better to have clarity in mind.
Life insurance is a good option for the financial security of your family. Insurance will get you peace of mind till you are alive. And you may properly concentrate well on your core responsibility, whether it is a job or business. Still, you need to understand the dimensions of the insurance coverage. So that you can opt for the best-suited insurance for the betterment of your family.