How do life insurance companies make money?
July 16, 2010 - 12:22 pm
I mean, there’s not really an ideal customer. Everyone’s gonna die.
I did the math for my life insurance. I’m 22. I’m young, healthy, and I don’t smoke. I have a $20,000 life insurance policy that I pay $10 a month for. Even if I live for another 70 years, I’m only going to pay them $8400, meaning that they’re going to lose $11,600.
How do these companies stay in business?
Basically what these life insurance companies do is they invest 70% of your money in stable or govt. related funds and projects. Then they invest in gold. Also they give out your money to people as loans. Thus they earn a fat premium of the money that you give them.
July 16th, 2010 at 6:07 pm
Statistics and investments. They know that statistically they will only pay out claims on a small percentage of the policies. Also, they invest their money to earn additional profit.
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July 16th, 2010 at 6:53 pm
They invest the money and get a return on that investment. Go to any financial website (MSN money may have it) and plug that $10 a month into an investment calculator and see how much they get at what rate of return.
Plus, if you don’t keep that policy your whole life they get all the premium and don’t pay out a thing.
Make sure you need the policy. if you don’t have dependents or you have PMI for your home if you have one, you might be better off investing that premium yourself. Term is cheaper but whole life gives you other benefits.
Only buy the coverage you need for you stage in life. You’re unlikely to die soon so that’s why it’s so cheap. They know they will make money off you.
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July 16th, 2010 at 7:31 pm
Basically what these life insurance companies do is they invest 70% of your money in stable or govt. related funds and projects. Then they invest in gold. Also they give out your money to people as loans. Thus they earn a fat premium of the money that you give them.
References :
self knowledge
July 16th, 2010 at 7:58 pm
You will not continue to pay $10mo. for your policy. Your rates will increase as you get older. Smokers and people with health problems pay much more.
Also, unless your policy is a self-renewing policy, you will only have your term policy for a certain amount of time. If you do not die during that term, they keep all the money you paid into it. Then you have to get a new insurance policy, at which time you can change the amount that it is for, but your rates will be adjusted according to your age and your health – you will be older and chances are, you will not be in the same health. You will keep this term policy until you die or it runs out. This cycle keeps repeated until the end of your life, as long as you have a term policy. You don’t die, and they keep your money and you have to get a new policy every time your current one runs out.
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My dad sells life insurance