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Life insurance is a contract, according to which an insurance company assures a payment of a death benefit in the event of a policy holder's death. As per the life insurance contract, the life insurance policy owner must, in turn, make premium payments in order to receive sustained protection. The general premise of life insurance is to mitigate the financial loss resulted from death by distributing the funds to the beneficiaries of those who died. Life insurance companies implement this using a practice called risk pooling. There are three main types of life insurance contracts: term life insurance issued for a given number of years, whole life insurance designed to provide coverage for the duration of the whole life of the insured, and a combination of the two. In addition to the death benefit, most whole life insurance policies also offer cash value, which accumulates over time. Today many life insurance contracts may be supplemented with various forms of investments, such as mutual funds and annuities.
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