How are life insurance companies able to make money?

At some point in your life you may have wondered how do these Life Insurance Companies make money? I mean, they charge like $25 a month to provide a 30 year old man a 10 year $1,000,000 term life insurance policy and even if less than 1% of the policyholders die that still would be very difficult to pay out those claims. How do they make this work? Do they find ways to wiggle out of paying claims? Many have a suicide clause for the first two years of the policy, but in every other instance they are required to pay death benefits. Even if the insured was driving drunk and caused his/her own death the life insurance company would have to pay out death benefits.
Even with the best underwriting it is possible for the life insurance company to pay out death benefits equal to the premiums collected. Life Insurance companies, therefore, have to rely on big gains from long term investments like commercial real estate, stocks, and bonds to achieve great profitability. Most Life Insurance companies only invest 20% of their holdings in the stock market. Liquidity is an important factor in their portfolio as well because they can never be sure how much of their assets may be needed to fund operational costs and death benefits. High grade corporate bonds and short term commercial real estate loans are an excellent source of income for Life Insurance Companies. The time value of money is a principle that allows Life Insurance Companies endless potential to grow their holdings.
Now Serving the Savannah, GA and Hilton Head, SC area. ING, Prudential, Banner Life, Genworth Financial, Metlife, Lincoln Financial, TransAmerica, American Equity, AVIVA, John Hancock, and West Coast Life just to name a few of the top Life Insurance Companies we represent.
Life Insurance Savannah If you have been searching for the easiest way to get Life Insurance quotes from 30 different companies then Life Insurance Savannah is the Agency for you. If you fill out our short quote request form, quotes from the most competitive Life Insurance Companies will be promptly emailed to you. Does it get any easier than that? Your information will be used by Life Insurance Savannah to provide you with the most accurate quotes. We do not sell your information to other companies the way many other Life Insurance websites do. Life Insurance Savannah is a partnership between Matthew Rubin Financial Services based in Tybee Island, GA, and ZJN Agency, founded in 1977.