Sep 25
How life insurance carriers make money…
People ask me this question all the time, “Life insurance rates are so low, so how do life insurance companies make money?” Let’s start by looking at how life insurance is priced.
Remember, when insurers underwrite policies they look at your driving records, family history, heath, height and weight, age, etc. They give the best prices called “preferred plus rate” to only the healthiest of people. So they know the risk of having to pay out is very slim. If you do not meet the criteria for the healthiest rate, then you will be charged more according to the risk. If you’re considered uninsurable, then the risk to insure you is too high in the eyes of the carrier. In other words if they insure you, then they really don’t think you’re going to die and they’re willing to take the chance.
In addition, they know that most policies will lapse within the first 5 years. That means that they collected 5 years of premium and now there is no longer a risk of death because the policy is no longer in force. It’s really that simple.
(No Ratings Yet)
Loading ...
Print This Post
