< p>It was 2nd September, a Sunday in 1666. A fire started in a bakery at Pudding Lane. It soon spread all over the inner city and engulfed 13,200 houses, 87 parish churches, the St. Paul’s Cathedral and numerous other buildings belonging to the City Authorities! It raged for three whole days inside the old Roman City Wall. Luckily, the fire stopped just before it reached the district of Westminster. Yes, it was the Great Fire of London that ravaged the city from 2nd to 5th September in 1966. It took away so many thousand lives and destroyed so many thousand homes…
This fire disaster was the thing which lead to the present insurance system. It no longer remained a thing considered as unwanted expenditure but an unavoidable expense. The fact is Life insurance is some form like marine insurance was existing in London from the start of seventeenth century itself. But it was nothing like the present Life insurance system.
Life insurance has been in existence from old ages and was being practiced right from the beginning in various rough forms like in Rome in 600 AD which used a primitive type. Funeral expenses and the family of the deceased were taken care of by guild which existed in roman sentry. Similar guilds also existed in middle ages. Life insurance was overtaken by certain other forms of insurance and life insurance got avoided because of reasons which will be discussed later.
Life insurance sale was born in late 1970 in United states of America. Even though a herd of companies started only few could survive because of lack of interest in it. Five is the number of policies which were sold by the first company. The main reason for this was that the system was such that only if the insurer died within the period for which the policy was sold, He would get face value. Since these policies had no cash value, insured got nothing in case he outlived the period.
The people then felt that as very few of them died prematurely, the premiums they pay for such long times did not fetch them anything and thus avoided life insurance as a whole. To counter this, new policies that provided cash value, which could be withdrawn while surrendering the policy were devised by the providers. The term or the period was made valid for whole life, thus providing death benefit to beneficiaries whenever the insurer died. The difference was they involved higher life insurance rates. The original was renamed term life and the new whole life insurance.
Presently there are many types of life insurance categorized in different ways.
There are protection policy and investment policies. The term life offers only death benefit and so falls in first category. Those which offer investment opportunity, like the whole life, universal life, and variable life fall in the second category.
Then there are temporary policies under which term life falls as it exists for a specific period and permanent policies under which the rest fall as they are valid for whole life.
With profit policies and without/non profit policy are the two categories of investment policies. In ‘with profit policies’ the policy holder gets to participate in the profit of the company by getting a share of profits of the company. Thus if carrier makes a profit the insured earns else he loses money. In the without/non profit policy’, a fixed return in obtained irrespective of the insurance carriers performance.
So from this, one can very well understand how trick life insurance policies can be. For each specific need, there is a policy. Term life insurance can also be not as surplus as one may think. But it is a popular one and the choice of experts when the need is insurance only. So while buying a policy, one must clearly see to it that the policy meets the requirement.