LIFE INSURANCE 1. General features of life insurance.—The term life insurance designates a form of insurance based on the contingency of life. Life insurance has one advantage which has given it a solid basis upon which to rest. It has only one contingency to consider. In all of its forms, even if the policy be payable at the end of an endowment period or a death, the contract is based on the possibilities of death during the period the policy must run. In other words, it is a form of insurance in which there is no doubt as to the sum that must be paid at the end of a period, which is deter mined by death of the insured or by the lapse of a spe cified number of years as in an endowment policy. There is but one element of doubt in the transaction and that is when the contingency insured against will occur. Other forms of insurance involve two ele ments of doubt; whether the thing itself will happen, and if so when it will happen. In comparing life in surance with any other form of insurance this impor tant fact of the solid basis on which it rests must be borne in mind, and if borne in mind much confusion will be avoided.
2. Early forms of insurance.—In a very crude form, there was a real element of life insurance, when centuries ago one departing for the Crusades made provision for a sum of money for his ransom in case he should be captured. If historic records were com plete, we should probably find that before the 17th century/policies of life insurance were issued in indi vidual cases backed by individuals or a group of un derwriters. The general conditions of life possibly as late as the early 18th century, made life insurance almost impossible as a commercial enterprise. The plagues that followed one another with startling fre quency were enough to have deterred anyone who thought of insuring the lives of individuals, or of put ting funds into any project for such a purpose. It would be evident to both parties to such a contract that the great devastations of the plagues which cost so many lives made the duration of life a most un stable thing. Without a basic knowledge of the dura
tion of life any form of life insurance at once became the merest gambling and continued in that state until the laws of mortality were developed.
De Witt, in Holland, probably made one of the earliest uses of the principles of life insurance when, in attempting to raise funds for the state, he used the principles of annuities for securing money. The an nuity was a form of investment by the individual who turned over his money to the state and received thereon a very fair degree of interest, which interest terminated when the individual died, the state being then relieved of any further obligation. But anything of this nature was sporadic and hardly ranks as life insurance as we understand it today.
3. Beginnings in England.—In England a charter was granted in 1706, to "The Amicable Society for the Perpetual Life Assurance Office." Other organi zations came into existence and more or less business was done, but it is now recognized that the true his tory of life insurance in England began in 1756, when there was put forward "The Society for Equitable Assurance of Lives and Survivorships." The initial success of the Equitable and the feature that really enabled it to survive when all the others went under, was the fact that for many years it did not promise to the beneficiary a fixed payment on the death of the assured, but divided the funds for a given year among all those who became beneficiaries by the death of assured lives in that year. The amount received by the beneficiary naturally varied with the number of deaths, but with the small experience concerning in surance which at that time existed in the world, any other method would have wrecked the Equitable as it did the previous societies which had attempted life as surance. In due time the Equitable grew in wealth and was able to promise a fixed sum on the death of the insured and this society, while never doing a large business, as we think of business today, nevertheless has continued successfully down to the present time.