How life insurance companies make profit?
The life insurance companies collect premiums from the policyholders and make investment by using these funds, the money earned will pay for the overhead expenses and claims. If 100 people purchased a policy from an insurance company, it is very impossible that these 100 people will die at the first year, if so; the worst of luck has fallen on this insurance company. Have you heard of all policyholders of an insurance company died at the very first year and the huge pay out toppled that company? Unless a war occurs, but insurance companies do not make compensation if death caused by war, so this will reduce the risk of mass compensation, what the insurance companies do to settle this crisis is to refund the premiums paid by the war victims. So, let’s assume if 3 percent of policyholders died prematurely at the first year, there is still 97 percent of policyholders pay their life insurance premiums the following year, the life insurance company will have cash coming in the following yea
