LIFE INSURANCE

method by which large groups of individuals equalize the burden of financial loss from death by distributing funds to the beneficiaries of those who die. Life insurance is most developed in wealthy countries, where it has become a major channel of saving and investing. (See insurance.) The three basic types of life insurance contracts are term, whole life, and endowment. Under term insurance contracts, issued for a specified number of years, protection expires at the end of the period and there is no cash value remaining. Whole life contracts run for the whole of the insured's life and also accumulate a cash value, which is paid when the contract matures or is surrendered; the cash value is less than the policy's face value. Endowment contracts run for a specified time period and pay their full face value at the end of the period. Upon the death of the insured, the beneficiary may accept a lump sum settlement of the face amount, may choose to receive the proceeds over a given period, may leave the money with the insurer temporarily and draw interest on it, or may use it to purchase an annuity guaranteeing regular payments for life.