# How Do Life Insurance Companies make money? **URL:** \ **Category:** Factual Questions\ **Created:** [January 14, 2009, 10:08pm UTC](https://boards.straightdope.com/t/how-do-life-insurance-companies-make-money/481336 "2009-01-14T22:08:54Z")\ **Posts on this page:** 2\ **Page:** 2
**Author:** ![Cunctator](https://avatars.discourse-cdn.com/v4/letter/c/43a26b/32.png) [@Cunctator](https://boards.straightdope.com/u/Cunctator)\ **Post date:** [January 16, 2009, 11:24pm UTC](https://boards.straightdope.com/t/how-do-life-insurance-companies-make-money/481336/21 "2009-01-16T23:24:01Z")
> [@Duhkecco](#): > > > [@Cunctator](#): > > > > They make money the same way other businesses do: assess the costs of producing their products and then add on a profit margin. > > Well, sort of. It’s a bit of a stretch to say that paying a death claim is a cost of “producing” their products. It’s an expense that is incurred after the product is sold. The discounted, expected value of which is built into the cost of their products via the premium rate charged. ---
**Author:** ![Duhkecco](https://avatars.discourse-cdn.com/v4/letter/d/8491ac/32.png) [@Duhkecco](https://boards.straightdope.com/u/Duhkecco)\ **Post date:** [January 16, 2009, 11:57pm UTC](https://boards.straightdope.com/t/how-do-life-insurance-companies-make-money/481336/22 "2009-01-16T23:57:45Z")
Well, okay. I put “producing” in quotation marks. Pricing a life insurance product is \*similar \*but still quite different from pricing other products where the bulk of the costs are incurred in R&D and actual production. The expense of future death claims is, of course, a key component in pricing a life insurance product, but the expenses themselves are not incurred at the time of “production”. I feel that your post missed this distinction. Whether it’s a useful distinction … 🆒 [Previous page](https://boards.straightdope.com/t/how-do-life-insurance-companies-make-money/481336.md?page=1)