How Does Life Insurance Profit? 
Life insurance companies are no different than any other business . They must price themselves to make a profit or they could not exist . Term Life insurance is the easiest to explain . They take in $ 400 per year in premiums for example . They only sell this policy to young healthy people at this price . IF you die while insured they will pay your beneficiary $ 250,000 . If very many people died , this would never work . The life insurance company has run the numbers and knows exactly how many people with that policy will die while insured . It 's very very few . Most people will pay that premium for 20-years and never receive anything back . The money a life insurance company collects in premiums minus what they pay in claims minus their operational costs = their profit . 