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Insurance is a plan in which individuals and organizations who are concerned about potential risks will pay premiums to an insurance company, who in return, will reimburse them if there is loss. To generate a profit, the insurer will invest the premiums it receives. Examples of the different types of insurance available are automobile, home, health and worker's compensation. Whereas in most cases the insured is paid for their loss, with life insurance a beneficiary is paid when the insured person passes away.
The amount of the premium is determined by the operation of the law of averages. By investing premium payments in a wide range of revenue-producing projects, insurance companies have become major suppliers of capital, and they rank among the nation's largest institutional investors.
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