The Beginning of Life Insurance in the United States

Life insurance was originally established in the 1706 by two men, William Talbot & Sir Thomas Allen.  In 1762 Edward Rowe Mores created the “Society for Equitable Assurances on Lives and Survivorship” which became the basis of all life insurance today.  The sale of life insurance in the United States began in the late 1760’s and between 1787 and 1837 more than 24 life insurance companies came into existence.  Then in 1879 after the widely publicized masses of widows and orphans left stranded in the West, after the Battle of the Little Big Horn, military officers founded the “American Armed Forces Mutual Aid Association”(AAFMAA).  Before the creation of the AAFMAA, during frontier times, when an officer died, the remaining soldiers would pass a hat around to raise money for the surviving family.  The Battle of the Little Big Horn collapsed this system because there were too few survivors.  Beginning in the mid 1870’s companies like John Hancock Company, Metropolitan Life Insurance Company, and Prudential Insurance Company started marketing life insurance policies to the masses by providing policies with a death benefit as low as as $100.  The insurance agents who sold these policies would go on “debit routes” to collect the premiums on a weekly basis, and premium amounts would range anywhere from five cents to sixty-five cents.  In 1904 there were roughly 100 Life insurance companies in existence, but another 288 were established in the ten years from 1905 to 1914.  Life insurance policyholders increased dramatically following World War I, and by 1920 there were more than 120 million life insurance policies owned in the United States, approximately one life insurance policy for every adult citizen.  Currently there are about 900 life insurance companies doing business in the United States.  Life insurance sales have declined steadily since the 1920’s and the Life Insurance and Market Research Association  (LIMRA) estimates only 44% of U.S. households have individual life insurance coverage, which happens to be a 50 year low.  In general the middle class is not financially prepared for the death of a family member.  Studies indicate families would need to make a drastic or significant financial change if the death of a “bread winner” were to occur because there is not enough life insurance in place to protect the family.  In 2014 a LIMRA study on middle-market consumers found that only 46 percent own individual life insurance, revealing a critical gap in protection.  “Life insurance is the one product that can help families keep a roof over their heads, provide for basic living expenses, and allow time to recover and heal from the loss of a loved one,” said Robert Kerzner, president and CEO of LIMRA, LOMA and LL Global.  “LIMRA’s research shows that people do not fully understand the risks they take by not having adequate life insurance coverage.”  It is an interesting time in history where the middle class knows they need more life insurance, but procrastination and lack of understanding gets the better of most families.  Cost of insurance rates are at all-time lows and a 40 year old healthy super preferred non tobacco male can buy a $500,000 10 year term from multiple insurance companies for around $20 per month.  Please take the time and talk to an adviser about getting the correct amount of life insurance for your family.