How can an insurance company make a profit by taking in premiums and making payouts?

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Janiyah Newton

14 February, 18:18

How can an insurance company make a profit by taking in premiums and making payouts?

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Hillary · Answer 1

The value of the premiums the company takes in is higher than the value of the payouts it makes.

The insurance company always has a collection of premium. They will pool these premiums and invest it to other investments that have guaranteed payouts with the highest interest earned. In the event of payout, all revenue earned net of the amount paid is the profit of the insurance company.