How Does Life Insurance Make Money? 
Life insurance companies make money the same way that car insurance companies make money ... from the premiums you pay . The most simple form of life insurance is term life insurance . If 100 people buy a 20 - year term life insurance policy , they will all pay premiums for 20-years -LRB- less if they cancel early -RRB- but only 1 of them will die during the 20-years . 99 of they will outlive the term . The life insurance companies price each policy based on the likeliness that you would die while the policy is covering you . You do n't have to worry too much about insurance companies . They know the numbers . They make money . 