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

[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...

 

[Al Neri]

3 words

pre-mi-um

 

[JS80]

very complicated math is how they make money

 

[jfall]

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

 

[Joemonkey]

ask actuarytim

 

[SKORPI0]

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]

Originally posted by: her209
How do life insurance companies make money?

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]

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]

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...

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

Just like all other insurance

 

[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.

 

[her209]

Originally posted by: DeeKnow

Originally posted by: her209
How do life insurance companies make money?

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]

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...

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

 

[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.

 

[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.

 

[ElFenix]

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]

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]

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]

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.

 

[slackerinabox]

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]

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