How do life insurance companies make money?
Life insurance companies make money through the investment spread (interest) on the assets it manages. Insurance companies invest the majority of assets in safe, fixed income investments and profit from the investment returns both on the cost of insurance it collects as well as any remaining cash account value within their policies. Lastly, insurance companies make a small amount from fees charged in the policy, such as premium charges, management fees, withdrawal fees, and early policy cancellation penalties.
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