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[???] How do life insurance companies make money?

her209

No Lifer
Oct 11, 2000
56,352
9
0
I mean, its not car insurance, i.e., you don't continue paying for life insurance after you, or more accurately, your loved ones collect...

:confused:
 

jfall

Diamond Member
Oct 31, 2000
5,975
2
0
term life insurance. If you are still alive after the term runs out than you basically paid the insurance company a bunch of money for nothing
 

SKORPI0

Lifer
Jan 18, 2000
17,273
1,346
126
Info

Insurance companies collect small, certain amounts of money (premiums) from policyholders who want to avoid the possibility of a large, uncertain financial loss. The insurance allows the dollars of many to pay for the losses of a few. Insurance companies use historical data to figure the probability of losses and charge premiums accordingly, building in profit for themselves.
 

DeeKnow

Platinum Member
Jan 28, 2002
2,470
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71
Originally posted by: her209
How do life insurance companies make money?
:confused:
by collecting in premiums more than they have to pay out on policies... its just probability and statistics, and the urge in all of us to avoid 'risk'



 

EagleKeeper

Discussion Club Moderator<br>Elite Member
Staff member
Oct 30, 2000
42,591
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Sellig policies that have escape clauses in them.

People may purchase insurance and then run into a problem and are unable to continue the premiums.
 

b0mbrman

Lifer
Jun 1, 2001
29,471
1
0
Originally posted by: her209
I mean, its not car insurance, i.e., you don't continue paying for life insurance after you, or more accurately, your loved ones collect...

:confused:
Because the amount you pay into it, on average and with interest included, is more than your benefactors receive

Just like all other insurance :confused:
 

her209

No Lifer
Oct 11, 2000
56,352
9
0
Originally posted by: DeeKnow
Originally posted by: her209
How do life insurance companies make money?
:confused:
by collecting in premiums more than they have to pay out on policies... its just probability and statistics, and the urge in all of us to avoid 'risk'
Death is 100%. And its not like after you die, the life insurance can raise your rates to recoop some of the loss.
 

sao123

Lifer
May 27, 2002
12,593
147
106
Originally posted by: her209
I mean, its not car insurance, i.e., you don't continue paying for life insurance after you, or more accurately, your loved ones collect...

:confused:

its not just the money they get from the customers... they get craploads of interest on it too.
 

chambersc

Diamond Member
Feb 11, 2005
6,247
0
0
term life meaning that if you don't die you pay for nothing (as stated previously)
preimums that are invested the insurance companies so they make interest off your money.
many people paying into and only a few dying (as stated previously)

I think that about sumbs it up, OP.
 

newmachineoverlord

Senior member
Jan 22, 2006
484
0
0
Originally posted by: chambersc
term life meaning that if you don't die you pay for nothing (as stated previously)
preimums that are invested the insurance companies so they make interest off your money.
many people paying into and only a few dying (as stated previously)

I think that about sumbs it up, OP.
The only factor you missed is that most policies exclude certain causes of death from their coverage, particularly suicide. Since suicide is a fairly common cause of death, that makes them a lot of money from people who don't bother to read the terms before they off themselves. There are also those murders which are called suicides because the victim was poor and they don't want to bother investigating, happens more often than you might think.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
101,625
5,920
126
for whole life, the premiums are invested and they bet you die later than when they become profitable based on premiums and the interest rate they're receiving. it's when people die early that they lose money.
 

chambersc

Diamond Member
Feb 11, 2005
6,247
0
0
Originally posted by: newmachineoverlord
Originally posted by: chambersc
term life meaning that if you don't die you pay for nothing (as stated previously)
preimums that are invested the insurance companies so they make interest off your money.
many people paying into and only a few dying (as stated previously)

I think that about sumbs it up, OP.
The only factor you missed is that most policies exclude certain causes of death from their coverage, particularly suicide. Since suicide is a fairly common cause of death, that makes them a lot of money from people who don't bother to read the terms before they off themselves. There are also those murders which are called suicides because the victim was poor and they don't want to bother investigating, happens more often than you might think.
Thank you. I knew I was missing the "die only a certain way" clause.
 

everman

Lifer
Nov 5, 2002
11,288
1
0
There's a term called "The Law of Large Numbers", in life insurance it means that although everyone dies they don't all die at once. Via the use of mathematical models you can make sure you don't overexpose yourself to a particular group such as people over 65 or smokers. What you end up with is a very predictable group of people, you know how many will die within a very close margin.

And of course insurance companies are large institutional investors, they're making lots of money off of those premiums by investing it.
Also insurance companies hardly ever pay out on term life insurance policies, they don't need to because they hardly ever die while the policy is in place.
 

Reel

Diamond Member
Jul 14, 2001
4,484
0
76
Originally posted by: upsciLLion
The premiums are invested.

Originally posted by: Joemonkey
ask actuarytim
At times I am in ActuaryTm, but there is no I in ActuaryTm's name.
I had to read it a couple times but nice one.
 
Mar 15, 2003
12,668
103
106
Life insurance companies have a crew of hitmen working for them. Their job - to assassinate policy holders in a manner which makes the crimes actually look like suicides.
 

Joemonkey

Diamond Member
Mar 3, 2001
8,862
2
0
Originally posted by: upsciLLion
The premiums are invested.

Originally posted by: Joemonkey
ask actuarytim
At times I am in ActuaryTm, but there is no I in ActuaryTm's name.
You're right! All this time I thought he was ActuaryTim not ActuaryTm
 

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