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Life Insurance Annuity Essay

774 words - 3 pages

As a tool for investment and financial security, annuities have been around for quite a long time. Annuities first started in the ancient civilization of the Roman Empire as a way for Roman citizens to receive a yearly payment for their lifetimes or for several years in exchange for a large upfront payment. According to, early Roman annuities were often given to Roman legionnaires as payment for years of faithful military service. As time passed, the modern annuity began to take shape.

During medieval times, the concept of lifetime annuities bought with a single initial premium became a way that was popular among nobles for funding the constant warfare that was a fact of life in that period. According to the Annuity Museum, records show that one of the most popular annuities of the medieval era was called the tontine. This annuity was one where the participants purchased a share in an annuity pool, and then, in turn, received a lifetime annuity. As time passed, each participant would receive a larger payment because the payments were divided among the surviving participants of the initial annuity pool. As the participants died off, ever increasing payments would be made to them. Finally, the sole remaining survivor would reap the benefits of the remaining annuity principal. One of the oldest and longest lasting tontines was the annuity called the State Tontine of 1693, which was started in the United Kingdom as a way to pay for its many wars with France.

As the modern financial system started to develop, Dr. James Dodson of England began the formation of the Equitable Life Assurance Society of London in 1756. According to Edwin W. Kopf in his work, “The Early History of The Annuity,” this was one of the first companies formed to offer a modern form of life insurance annuity. Dodson founded this company and the annuity that it offered as a way to provide a form of insurance that would be available to persons of all ages. As the Equitable Life Assurance Society wrote policies, it issued policies based on the assurance of fixed sums on the surviving of a policyholders beneficiaries and for any term of time the policyholders wanted to purchase the annuity for. Premiums of this annuity were governed by the age, lifestyle, and health of the policyholders seeking to enter into the annuity. These basic rules laid down the foundation of a distinguished modern life insurance annuity company that lasts still in our present day.

In the United...

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