how does life insurance make sense, like how does $40/month for 10 years get you 500,000 life insurance?

Question

I’m probably just stupid 😭

In: 4901

Answer 1

For term life insurance the bet is if you give 10,000 people coverage for 10 years, for $40/month each, you’ll have $48 million in revenue, and pay out perhaps $45 million in claims. You’ll also get to earn some interest because the majority of the deaths will likely happen later in the 10 years rather than evenly across the whole period.