Patman
Staff member
This is something that I've been wondering about for a while now, how can an insurance company possibly make money selling life insurance??
Take my own policies for example. My wife and I pay roughly $20 per month for each of our $200,000 policies. And without a doubt, we will both die someday so our insurance company will eventually have to pay out $400,000. But yet the total of our premiums will never come even close to $400,000! For example, if we paid into the plan for 50 years, our total for the premiums is only $24,000. So even if the insurance company is investing the money we're giving them every month, they can't possibly turn $24,000 into more than $400,000 in order to turn a profit.
So how on earth do they do it? Or is life insurance something they always lose money on, and they make it up with the other types of policies they sell such as home and car insurance?
Take my own policies for example. My wife and I pay roughly $20 per month for each of our $200,000 policies. And without a doubt, we will both die someday so our insurance company will eventually have to pay out $400,000. But yet the total of our premiums will never come even close to $400,000! For example, if we paid into the plan for 50 years, our total for the premiums is only $24,000. So even if the insurance company is investing the money we're giving them every month, they can't possibly turn $24,000 into more than $400,000 in order to turn a profit.
So how on earth do they do it? Or is life insurance something they always lose money on, and they make it up with the other types of policies they sell such as home and car insurance?