A simple transaction between an insured person and the insurance company has its roots dating back to ancient Rome when clubs were formed to help offset the loss of a family member and to assist with the families financial recovery.

As early as 5000BC China and other countries purchased insurance in case of loss of the ship's cargo at sea.

Through its various permutations throughout the ages, life insurance has become an integral part of most families financial planning as we are all beset with the guarantee of taking the trip to the great beyond.

Benjamin Franklin played a formative role in the insurance company concept in regards to the reimbursement of those insured families who lost their home to fire.

Several other factions delved into the formation of Life Insurance companies shortly thereafter and many of these new life insurance companies would allow the purchase of life insurance on anyone.

Thus, people who purchased life insurance policies on strangers would collect the death benefit shortly thereafter as the insured met with an unexpected accident or was outright murdered. Many of the earliest life insurance companies failed miserably until they discovered the meaning of insurable interest and those later companies would indeed prosper over time.

Today, America as a nation has over 9 trillion dollars of life insurance face amount in force--and the marketplace is still growing.

The earliest form of life insurance was a whole life policy. A whole life policy was exactly that; premiums were to be paid for the insured's whole life. The whole life policy is still marketed to this day and many dividend paying whole life policies are unique in that as the policy ages, the dividend grew with quality companies.

It is important to note that the dividend from a whole life policy is a return of overcharged premiums in the early years of the whole life policy. Therefore dividends from a whole life policy are not taxable income.

The negatives to a whole policy are the higher costs, the inflexibility inherent in most whole life policies and the glaring fact of comparison to a term policy.

When the average couples were presented with the death benefit differences between a whole life policy and a term policy, the differences were huge. In the late 70's a high school football coach saw this huge difference and decided to start a company where people would have the option of buying or keeping their present whole life policy or purchasing their term insurance and investing the difference. The increased death benefit on the term insurance life policy was huge and the insurance industry went through a significant change in order to compete with this simple concept.

The downside of the term life insurance and investing the difference were the higher costs of not just the term life insurance but the mutual funds that were sold for investing the difference. The mutual funds had very high costs and once again the consumer was faced with further educating themselves about how best to approach their need for life insurance within their family unit.

Universal life came over from England in the late 70's and by the early 80's several large insurance companies had developed a universal life insurance policy that exposed all the relevant costs and allowed the consumer to customize their life insurance needs; the policy was and is very flexible allowing insured's to overpay, underpay and skip premiums. Some chose to pay the absolute minimum to keep the policy in force until the insured's age 85 or 100; as the key negative with term life insurance was the lack of ownership equity and expiration of the policy after a selected period of 5, 10, 15, 20, 25 and 30 year term periods. It should also be noted that less than 2% of all term life insurance ever pays a death benefit due to the insured either lapsing or failing to renew the policy.

In the mid 90's a variant of the universal life policy came along called Indexed Universal Life Insurance. This life policy offered all the flexibility of the universal life policy but instead of the insured receiving a fixed interest rate set by the issuing company based upon their bond portfolio returns, the Indexed Universal Life policy allowed the insured to chose any of the well known stock indexes and the policy cash values would receive accreditation based upon the underlying index chosen. The negative was that in a great year the insured's return would be capped or limited in accreditation. The positive offset to this was that in a down year, the insured's cash values suffered no decreases and some policies even guaranteed a 1% or 2% minimum in a negative year.

Indexed Universal Life can be 'dialed in' so as to expire at a given future date with a rider called a No Lapse Guarantee. It can also be over funded and unfortunately the government decided that the over funding had to be limited and only so much premium could be paid in while at the same time maintaining a specific death benefit corridor. In short, the ability to over fund a universal life or indexed universal life policy as a supplement to retirement is still a viable alternative but the specific parameters of cash value to death benefit must be maintained. All life insurance companies offer this service of watching the policies cash value in relation to its death benefit.

With Indexed Universal Life a consumer can design the policy so that they receive all their premiums back should the insured not die before the chosen expiration date of the policy.

And Indexed Universal Life policies are marvelous perks to offer key employees as the employer can choose to allow the key employee to vest in the policy over time and eventually own the policy outright. Plus, the employer can design the program so that the company is reimbursed all premiums paid when the key employee takes ownership of the policy. During the vestment period, should the key employee die, his/her family would receive the bulk of the death benefit and the employer would be reimbursed for their premium expenditures as their interests may appear. It is important to note that all during this time period the policy's cash values were an asset on the company's books.

Please contact us if you have questions or would like to learn more about the various types of life insurance being offered in the marketplace today.