I was going through life insurance policies and noticed that even if I lived to be 100+ the amount of money I would pay into a life insurance policy would still be lower than the insurance pay out. I imagine many people die much sooner and get paid out even more than what they contributed. How do life insurance companies still profit off these policies when everyone will eventually die and cash out? It’s not like car insurance where you can go without an accident.
In: Economics
Two ways
1. Buybacks: as explained when i got mine, if you become sick, as most people do before they die, you’ll likely incur medical expenses. So let’s say you’re dying of cancer the costs progressively.get more and more. Well the company will buy back the policy for a set amount. So your two million policy is now a quarter million in cash to help you and your family today, and the policy ends. Now you don’t have to take this money but it’s an option
2. Now this is speculative, but insurance companies pay a lot of money for people to do statical research on the police they offer. So they’re not gonna offer you a million dollar policy if it doesn’t make sense for them.
If you buy your policy at 30 and are likely to continue paying the premium until 65 well, they likely have made enough money to cover the policy, otherwise why would they issue it. It’s like gambling the house is gonna win because they know the math
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