Life Insurance 101 – What is Life Insurance?

Life Insurance Awareness Month #LIAM

According to the Dictionary: “Insurance that pays out a sum of money either on the death of the insured person or after a set period.”

Essentially, you transfer to an insurance company the financial risk that your beneficiaries would be exposed to if and when something fatal is to happen to you. It is really no different than car or home insurance, it just happens to be applied to human life.

The concept of Life Insurance in American was first started as the “Philadelphia Contributionship for the Insurance of Houses from Loss by Fire” (whew… that’s a mouthful!) since the American housing construction was much like London in the 1600s – all entirely of wood.

An interesting history fact is that Life Insurance, is that it was greatly supported by Benjamin Franklin, who gladly added “Insurer” to his already long list of titles. He was instrumental in creating the first American Life Insurance Company: “The Presbyterian Minister’s Fund.”

Life Insurance, just like any other financial product, was not exempt of scandals and fraud. Ranging from insurers who did not have the right amount of reserves to pay claims to insurers forcing competitors out to create monopolies. Not to mention the countless of Life Insurance policies that people sold to unscrupulous sharks as collateral for loans. It was truly “all about the Benjamins! (Oh yes, I did… )

There was also a lot of outrage from religious authorities who did not agree with putting a value to human life until it was shown that it worked at protecting widows and orphans.

Insurance today has significantly evolved. Throughout the month you will learn how through regulation, technology, and financial concepts – it is no longer “Your Grandaddy’s Life Insurance”

Do you know any fun historical facts about Life Insurance? Feel free to post a comment!

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