Term Insurance

Term insurance (or Term assurance, especially in the Commonwealth of Nations), is a contract between an insurance policy holder and an insurer or assurer, where the

insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder).

Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either

regularly or as one lump sum. Other expenses (such as funeral expenses) can also be included in the benefits.
Term policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract

to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
Term-based contracts tend to fall into two major categories:
• Protection policies - designed to provide a benefit, typically a lump sum payment, in the event of a specified occurrence. A common form - more common in years

past - of a protection policy design is term insurance.
• Investment policies - the main objective of these policies is to facilitate the growth of capital by regular or single premiums. Common forms (in the U.S.) are

whole Term, universal Term, and variable Term policies.

An early form of Term insurance dates to Ancient Rome; "burial clubs" covered the cost of members' funeral expenses and assisted survivors financially. The first

company to offer Term insurance in modern times was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas

Allen. Each member made an annual payment per share on one to three shares with consideration to age of the members being twelve to fifty-five. At the end of the year

a portion of the "amicable contribution" was divided among the wives and children of deceased members, in proportion to the amount of shares the heirs owned. The

Amicable Society started with 2000 members.

The first Term table was written by Edmund Halley in 1693, but it was only in the 1750s that the necessary mathematical and statistical tools were in place for the

development of modern Term insurance. James Dodson, a mathematician, and actuary, tried to establish a new company aimed at correctly offsetting the risks of long term

Term assurance policies, after being refused admission to the Amicable Term Assurance Society because of his advanced age. He was unsuccessful in his attempts at

procuring a charter from the government.

The sale of Term insurance in the U.S. began in the 1760s. The Presbyterian Synods in Philadelphia and New York City created the Corporation for Relief of Poor and

Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen Term

insurance companies were started, but fewer than half a dozen survived. In the 1870s, military officers banded together to found both the Army (AAFMAA) and the Navy

Mutual Aid Association (Navy Mutual), inspired by the plight of widows and orphans left stranded in the West after the Battle of the Little Big Horn, and of the

families of U.S. sailors who died at sea.