Weekly Premium Insurance

What Is Weekly Premium Insurance?

Weekly premium insurance is a type of financial protection where the insured makes weekly payments for coverage.

Key Takeaways

• Weekly premium insurance dates back to the late 1800s, predating monthly insurance plans.
• Weekly premium insurance was popular because payments aligned with insured individuals’ wage schedules.
• As incomes rose, monthly insurance policies became more popular, leading to the decline of weekly premium insurance plans.

This type of insurance, also known as industrial life insurance, was introduced by Prudential in 1875 and was common in the late 1800s and early 1900s. Insurers struggled to promote monthly premium payments and instead opted for smaller and more frequent weekly payments that aligned with workers’ pay schedules and modest incomes.

How Weekly Premium Insurance Works

Weekly premiums were a feature of industrial insurance, a type of life insurance offered to workers in industrial jobs. Insurance companies collected premium payments through home visits by their agents. The popularity of weekly premium insurance declined as rising incomes made larger and less frequent payments more affordable for many families.

Insuring America

In the early days, insurance was often sold rather than sought after by consumers. Insurance companies took advantage of the notion of adverse selection, which suggests that individuals seeking insurance are more likely to require it due to higher risks. To persuade people to buy insurance, companies relied on large sales forces.

Weekly policies primarily consisted of whole life insurance. The faster collection of weekly premiums allowed insurers to reduce the cost of these policies. Workers were enticed to pay a few dollars each week for coverage, such as $2,000 in case of death or double that amount for accidental death, also known as double indemnity. The insurance agent would collect the premium on payday, either at the policy holder’s home or workplace.

Building cash value was a significant selling point for these policies, both in the past and present. After 20 or 30 years of payments, the policy would accumulate a cash value equivalent to the premiums paid or the policy’s face value. Policyholders could also borrow against their policies.

Disability policies were also sold in a similar manner before Social Security provided disability coverage in 1956. Prior to this, injured workers had little support to rely on after being unable to continue working due to job-related injuries.

It is hard to imagine a society today where workers received only a paycheck from their employer without any government safety nets or retirement benefits.