I will die. I know this. Does life insurance change that fact?

Question

I pay less than $100 a month for life insurance.

When I die, my beneficiary receives $100,000.

So if I live for 1000 months, its a break even deal.

And 1000 months is about 83 years.

If I die before the next 83 years,

the insurance company loses money.

How do they stay in business?

Answer 1

Einstein said that compound interest is the most important force in the universe.

Answer 2

It depends if it is term or whole life.  Term insurance is for, say, 20 years.  You pay your preium and they hope you don't die.  That way, you pay 24,000 and they pay you nothing.  All the while they invest your $100 a month, so they earn interest.  That is offset by the people who buy the policy and die the next day.

Answer 3

The main factor Life Insurance take into their advantage is

a) inflation degrades the value of your money. Depending on inflation the 1200 a year you put in 5 years is valued close to 1800-1900$ in todays dollars. Take also into account the money they can make by investing that money on fund which gave them 8%

b) On a statistical distribution  of say 10 million people insured the money in  from all these policy and money out (paid out to cover living and death benefits)  for  an insurance company like newyork life is  ridiculously high and  works out to their advantage

Answer 4

live it up

Answer 5

Are you sure that the premium stays the same for 83 years? Most premiums go up as the insured gets older.

Answer 6

Life insurance is a gambling game where you bet that you'll die, and the insurance Co. bets that you'll live.

     Read the fine print on your policy, or get a lawer to read it for you, and you will see how they make money from you.

Answer 7

You will die, the question is, what happens to those you leave behind? If they are dependent on your income to meet expenses, will they just have to fend for themselves? Life insurance allows you to live on in the form of replacing your income for a period of time—often a years. You are gone, but your wisdom and foresight live on. As for the insurer, it makes money by investing the premiums of all its policyholders for the period of time they are living. Many people take out term life policies that cover a period of years—the term. If the policyholder outlives the 10-, 20-, or 30-year term policy, as the vast majority of policyholders do, then the insurance company pays out nothing, keeping the premiums and the earnings made from them. If you have whole life, then a death benefit is guaranteed to be paid (assuming you do not default on the policy) but the premiums paid and the investments the insurer has made with them will result in a profit for the insurance company. Inflation is a factor, too. $100 paid in premiums in 1980 is worth $256.91 today. The insurer pays the death benefit agreed upon at the time the policy is started, but that amount is diminished by inflation.

Answer 8

No, life insurance doesn't prevent death.  

Most people only keep a policy in force an average of five years.  70% of people who die in the US have NO active life insurance at the time.  

And they make their money from the cash reserves - investing the reserves, NOT from the premiums.

Answer 9

cuz not everyone is dying that quick.

Answer 10

You don't think the insurance company is putting it under a mattres.

$100 to Start

$1200 a year

7% rate of return

50 years of investing

Value after 50 years about $550,000

Enough Said!!!!!!!!!!!!!!!!

Answer 11

Because people pay for this type of coverage in different forms, and some people start paying for it for their children the day they are born, so you have people who are paying that $10 a month for 12 months for up to 80, 90, and 100 years.  Also, if family doesn't know or realize that their loved one that died had coverage with a company, then they don't pay out the benefit if not ever notified.