Obviously i understand how insurance works, but how the hell does life insurance work considering everyone is going to die? I see so many companies offering what ludacris amounts of money for tiny weekly/monthly payments. How do the insurance companies actually make money?
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People underestimate the impact of investments in the insurance equation. Even if the insurance company ends up paying out more to your survivors than you paid in during your life, they’ve had five or ten or fifty years to invest the premium you paid in; they have made a *lot* of money on those investments in the meantime.
This is true of pretty much all insurance, especially as it becomes more commoditized. Most P&C insurance companies actually take a slight loss if you just compare the amount they take in from premiums and the amount they pay out for claims. They remain (insanely) profitable because of the investments in between.
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