Insurance is a perfect tool for our everyday lives that it’s hard to operate without it. Flashback to the colonial period, insurance arrived on the American landscape just about the same time the idea of a single nation—the United States—began to form. It was ushered in by one of the country’s Founding Fathers. Let’s take a look at the history of insurance in the U.S.
Americans in general have more negative attitudes about government than people in most other countries, and certainly more negative than people in other democratic countries. This has been a consistent theme in American history since at least the 18th century. Several explanations have been given for this, starting with the self-selection of immigrants to the United States as far back as colonial times, when only the most adventurous or most desperate would brave the perils of the unknown. Draft dodging in European countries was a major source of immigration in the 19th century, and other waves of immigration followed failed efforts at political revolt and rebellion. There is also a religious dimension to this history, since many groups of immigrants defined themselves in opposition to established churches, or all hierarchical churches.
A variant of the first explanation is de Tocqueville’s: the absence of a traditional aristocracy and the attendant social hierarchies in the New World produced a culture much less accepting and respectful of authority, much more individualistic and independent, than existed anywhere else.
Although in fact socioeconomic status in the United States is at least as stratified as it is in other industrialized countries, in much of the rest of the world a large proportion of the population identifies itself as working class, or working people. In the United States, everyone self-identifies as middle class. This leads to a very simple syllogism about why the United States has no universal health insurance: there is no self-identified working class—no labor party, no national health insurance. It is hard to dis-confirm that syllogism. But it leads to the fourth point.
- Why had there never been a successful labor party in the United States? The answer certainly has something to do with the abundance of free or quasi-free land earlier in this nation’s history, which meant that a substantially greater proportion of relatively low income working Americans owned real property than in most of the world. This abundance of land not only led to middle class self-identification but also permitted geographic mobility that made “exit” an alternative to “voice” among those with grievances toward the status quo.
Types of Insurance
The Philadelphia Contribution-ship for the Insurance of Houses from Loss by Fire set new standards for construction because it refused to insure houses it considered fire hazards. The criteria used to evaluate buildings would one day be reworked into both building codes and zoning laws.2
Seven years later, Franklin was also instrumental in getting the first life insurance company, the Presbyterian Ministers’ Fund, off the ground.3
The various religious authorities at the time were outraged at the practice of putting a dollar value on human life, but their criticism cooled with the realization that the payment of death benefits worked to protect widows and orphans. The Industrial Revolution then brought the necessity of both business insurance and disability insurance home to companies and individuals alike.
Throughout history, the types of insurance offered have expanded in reaction to new risks. 1864 saw the Travelers Insurance Company sell its first accident policy. 1889 saw the first auto insurance policy.4 As modern life grew more complicated, variations in insurance coverage kept developing.
Life insurance provides for your family or some other named beneficiaries on your death. Two general types are available: term insurance provides coverage only during the term of the policy and pays off only on the insured’s death; whole-life insurance provides savings as well as insurance and can let the insured collect before death.
Health insurance covers the cost of hospitalization, visits to the doctor’s office, and prescription medicines. The most useful policies, provided by many employers, are those that cover 100 percent of the costs of being hospitalized and 80 percent of the charges for medicine and a doctor’s services. Usually, the policy will contain a deductible amount; the insurer will not make payments until after the deductible amount has been reached. Twenty years ago, the deductible might have been the first $100 or $250 of charges; today, it is often much higher.
A disability policy pays a certain percentage of an employee’s wages (or a fixed sum) weekly or monthly if the employee becomes unable to work through illness or an accident. Premiums are lower for policies with longer waiting periods before payments must be made: a policy that begins to pay a disabled worker within thirty days might cost twice as much as one that defers payment for six months.
A homeowner’s policy provides insurance for damages or losses due to fire, theft, and other named perils. No policy routinely covers all perils. The homeowner must assess his needs by looking to the likely risks in his area—earthquake, hailstorm, flooding, and so on. Homeowner’s policies provide for reduced coverage if the property is not insured for at least 80 percent of its replacement costs. In inflationary times, this requirement means that the owner must adjust the policy limits upward each year or purchase a rider that automatically adjusts for inflation. Where property values have dropped substantially, the owner of a home (or a commercial building) might find savings in lowering the policy’s insured amount.
Automobile insurance is perhaps the most commonly held type of insurance. Automobile policies are required in at least minimum amounts in all states. The typical automobile policy covers liability for bodily injury and property damage, medical payments, damage to or loss of the car itself, and attorneys’ fees in case of a lawsuit.
Other Liability Insurance
In this litigious society, a person can be sued for just about anything: a slip on the walk, a harsh and untrue word spoken in anger, an accident on the ball field. A personal liability policy covers many types of these risks and can give coverage in excess of that provided by homeowner’s and automobile insurance. Such umbrella coverage is usually fairly inexpensive, perhaps $250 a year for $1 million in liability.
The property, goods, machine, Furniture, automobiles, valuable articles, etc. can be insured against the damage or destruction due to accident or disappearance due to theft.
There are different forms of insurances for each type of the said property whereby not only property insurance exists but liability insurance and personal injuries are also the insurer.