40% of people die with less than 10K in assets

[Petunia 100]

I am just confused how they are making a profit.. it doesn't really seem like a good gamble to me, honestly, considering how people live. It's scarily easy to die.

They can make a profit because they price the policies in such a way that the odds are in their favor.

Simple example: Suppose a particular life insurance company sells 100 life insurance policies to 40 year old men, in the amount of 10k. They know the odds are that the average person will keep the policy for 15 years. They know that 2 of the 100 will die during the 15 years. So, they build this knowledge into the price of the policies. They know they will pay out 20k, they know they have overhead costs, and they know they want to make a profit. So perhaps they price the policies at $26.67 per year. 100 policy holders paying $26.67 each for 15 years equals 40k.

I just completely made these odds up out of thin air. But insurance companies don't just make them up. Instead, they employ actuaries. Actuaries are people who crunch these sort of numbers all day long, based on hard data. We know from statistics that the larger the poplulation, the closer the results will be to the average. So, when you are selling hundreds of thousands of policies, you expect all results will be close to the average (number of deaths, number of people who drop the policy each year, etc.)

It's not all that different from how casinos stay in business, the math is just a bit more complex.

The insurance company is always going to come out ahead. But, you're not buying life insurance to "win", you're just making sure your dependents will be provided for in the event you are not around to do it yourself.