Brian Allen, age 14, of Annapolis, Md., for his question:
WHEN WAS LIFE INSURANCE FIRST USED?
Life insurance is a document issued by an insuring organization on the assumption of the risk of death of a policyholder. The earliest known type of life insurance was the burial benefits that ancient Greek and Roman religious societies provided for their members.
The tontine annuity system, founded in Paris by the 17th century Italian born banker named Lorenzo Toni, has been regarded as an early attempt to use the law of averages and the principle of life expectancies in establishing annuities.
Under the tontine system, associations of individuals were formed and a fund was created by equal contributions from each member. The sum was invested and at the end of each year the interest was divided among the survivors. The last remaining survivor received the entire principal.
The first life insurance company in North America was founded in 1759 in Philadelphia. It was named the Corporation for the Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers.
Benjamin Franklin helped found this first life insurance company. Earlier, in 1752, he aided in founding the first mutural fire insurance company.
It was not until the 17009 that a scientific basis was developed for determining life insurance rates. Edmund Halley, the famous British astronomer, prepared the first mortality table showing the death rate over a year's time for each age group. Life insurance is now based on the mortality table.
People buy life insurance to help meet specific needs. For example, families need funds to help replace the income lost when the head of the family dies. As the family grows, the need for life insurance increases. When the children grow up and can provide for themselves, this need lessens.
When the children have grown up, the cash values of policies no longer needed for protection may be converted into retirement income for the head of the family.
In 1705, the first successful life insurance company, the Amicable Society for a Perpetual Assurance Office, was founded in England.
In 1835 the first United States mutual life insurance company, the New England Mutual life Insurance Company, was chartered.
In 1847 the first life insurance company in Canada, the Canada Life Assurance Company, was founded.
Life insurance may be classified in a variety of ways. A classification depending primarily on the manner in which the premium is collected comprises regular ordinary, debit and group life insurance.
Regular ordinary insurance can be further classified into whole life, limited payment life, endowment and term. Debit life insurance can be classified into debit ordinary and industrial.