LIFE ASSURANCE

Life assurance on a long-term basis became possible after Edmund Halley, the famous Astronomer Royal, published his mortality tables in 1693. Based on an investigation into man’s expectation of life, the tables opened the way to predicting probable future mortalities. Previous to this, life assurance had only been conducted on a short-term basis. The earliest policies were designed to provide ransom money for sailors captured off the Barbary coast by the Barbary pirates. In 1705 an Amicable Society for a Perpetual Assurance Office was formed which collected contributions from members who wished to provide for their dependents. At the end of each year the funds available were shared among the dependents of members who had died during the year. The sum provided therefore was not steady, but depended upon (a) the sums collected, and (b) the number of members who died.

About one-quarter of the total of all insurance premiums is for life assurance, and some companies specialise in this type of business. This branch of insurance is generally known as assurance, since the risk differs in one important particular from those covered by insurance.

In the case of insurance a premium is paid to provide cover in the case of some eventuality such as fire taking place. If the insured suffers no loss from fire during the period for which the insurance was effected, then no payment to the insured will be due from the insurance company. In the case of life assurance, however, the eventuality-the death of the assured-is certain, the only uncertainty being as to when it will occur. The sum assured also-except for whole life policies-is certain to be paid to someone, to the assured if he lives to the end of the period of assurance or to some relative if he dies before that time. Expectation of life for men and women of different ages can be calculated with great accuracy. The amount of a life-assurance premium will depend on the sex and age of the person whose life is to be assured, the length of the period of assurance and the amount of the assurance. Nowadays, most life assurance is taken out in the form of endowment policies which combine assurance with saving. In this case the assured takes out a policy for a specified number of years. If he survives to the end of the period he receives the sum for which he assured his life together with any bonuses his policy has earned.