Life Insurance companies win #shorts

Published Date: 11/09/2023

Life Insurance: Who Really Wins — You or the Insurance Company?

It’s a sentiment many people quietly share but rarely say out loud: “I keep paying for life insurance, and the insurance companies seem to be the only ones winning.” The short clip from Insurance Hour—featuring host Karl Susman’s tongue-in-cheek remark, “Are you getting sick and tired of paying for life insurance only to see the insurance company making more and more money? Well, then just die.”—was clearly meant as satire.

But behind the dark humor lies a valid question worth unpacking: how does life insurance really work, who benefits from it, and why does it seem like insurance companies always win?

In this post, we’ll go beyond the punchline to explore the economics, psychology, and purpose of life insurance—why it exists, how it’s priced, and what consumers can do to make sure they’re not on the losing end of the equation.

The Business of Life Insurance: Why It Feels Like “They Always Win”

Let’s start with the uncomfortable truth: life insurance companies are designed to make money. They’re not charities; they’re businesses built on actuarial science and financial modeling that forecast risk across large populations.

Every time you pay a premium, you’re essentially contributing to a shared pool. From that pool, insurers pay out death benefits to beneficiaries of policyholders who pass away while the policy is active. The goal for the insurer is simple—collect more in premiums and investment income than they pay out in claims.

That’s not greed; it’s risk management. Without that structure, the system wouldn’t be sustainable. If every policyholder received back more than they paid in, the insurer would collapse. The “profit” is what allows insurers to continue paying out large sums when tragedy strikes.

Understanding Risk Pools and Probability

Insurance operates on a mathematical principle called the law of large numbers. The larger the pool of insured individuals, the more predictable the overall mortality rate becomes.

In the case of life insurance, companies employ actuaries—specialists who analyze statistics about age, health, gender, lifestyle, and family history—to estimate how long policyholders are likely to live. From there, they price policies to balance the cost of risk versus expected return.

This means for every 100,000 policyholders who buy a 20-year term policy, the insurer knows, statistically, how many will pass away before the policy expires. The rest will outlive the term—meaning the insurer collects their premiums and pays nothing back.

That’s why life insurance often feels like a losing bet. But it’s not designed as an investment—it’s designed as protection. You’re not buying it because you plan to “win”; you’re buying it so your loved ones don’t “lose” if something happens to you.

Term Life vs. Permanent Life: Where the Confusion Starts

A big part of the frustration around life insurance comes from misunderstanding the different types of policies available.

1. Term Life Insurance

• Provides coverage for a specific period (usually 10–30 years).
• If the insured person dies during the term, their beneficiaries receive the death benefit.
• If the term ends and they’re still alive, the policy expires—no payout, no refund.
• It’s pure protection and usually the most affordable option.

1. Permanent Life Insurance (Whole, Universal, or Variable Life)

• Covers you for your entire life as long as premiums are paid.
• Includes a “cash value” component that grows over time, which can be borrowed against or withdrawn.
• Premiums are significantly higher because part of your payment funds this investment element.

The misunderstanding often happens when consumers expect term life to behave like an investment (it’s not), or assume whole life will always generate strong returns (it might not). Each has a purpose—one prioritizes protection, the other blends protection with long-term savings.

Why Insurance Companies Profit—and Why That’s Not a Bad Thing

It’s easy to look at insurance companies’ profits and assume the system is unfair. But in reality, those profits fund the stability of the entire insurance ecosystem.

Here’s how insurers generate returns:

• Premium collection: Regular monthly or annual payments from policyholders.
• Investment income: Insurers invest premium dollars into bonds, real estate, and conservative assets to generate steady income.
• Risk spreading: Losses are distributed across a wide population, ensuring no single catastrophic event bankrupts the system.

That profitability is what guarantees the insurer will have the money to pay your family’s claim—whether that happens next year or decades from now. In short, you want your insurer to be financially strong. Their success is what underwrites your security.

The Emotional Disconnect: Paying for Something You’ll Never See

Life insurance is unique among financial products because you never benefit directly from it. You don’t buy it for yourself—you buy it for others. That psychological gap can make it hard to appreciate its value.

It’s not like health or auto insurance, where you might file multiple claims throughout your life. With life insurance, there’s only one claim—and you won’t be the one filing it.

This is where Susman’s humor strikes a nerve: people resent the feeling of paying into something indefinitely, knowing they’ll “lose” if they survive. But in reality, surviving is winning—it means you lived the life you were protecting. The insurance did its job simply by providing peace of mind during that time.

The Real Value: Financial Continuity and Legacy

So if life insurance isn’t about personal gain, what’s the point? The value lies in continuity.

For families, life insurance ensures:

• Mortgage and debts can be paid off.
• Children’s education can continue uninterrupted.
• A surviving spouse can maintain their standard of living.
• A family business can survive the transition.

In essence, you’re not buying a payout—you’re buying time, stability, and choice for your loved ones during the hardest possible period.

Making Life Insurance Work for You

If you want to avoid the feeling that “the company always wins,” here are strategies to make life insurance a smarter investment in your financial plan:

1. Buy early. Premiums rise with age and health risks. Securing coverage in your 20s or 30s can lock in lower rates for decades.
2. Match your policy to your goals. If your goal is income protection for dependents, choose term life. If you’re building long-term wealth or estate value, consider permanent life.
3. Reevaluate regularly. Life changes—marriage, children, business ownership, or debt levels may shift how much coverage you need.
4. Compare providers. Not all insurers price risk the same. Use an independent agent to compare options.
5. Avoid over-insuring. Don’t pay for more coverage than your family actually needs. A well-calibrated policy ensures value and affordability.

The Bottom Line: Everyone Can “Win” If You Understand the Game

Karl Susman’s remark may have been a quick punchline, but it highlights a deeper truth: insurance only feels unfair when you don’t understand how it works.

Insurance companies win by managing risk effectively. Policyholders win by transferring that risk away from their families. It’s not about beating the system—it’s about leveraging it to protect the people you care about most.

When viewed through that lens, both sides can come out ahead. Because while the insurer might profit financially, your family gains something far more valuable: security, stability, and peace of mind.