how does an insurance company make a profit? they basically take their premium dollars.let's say you have a car policy and you pay $500 or $1,000 a year for your car insurance.the insurance company then looks at what their losses are and let's say on average they pay60 cents per dollar for those losses and then on top of the 60 cents per dollar, they haveto pay the agent commission, the claims people, all of the operating expenses that are involvedwith having that insurance policy. after all those expenses are paid, then, that's theirprofit. it depends on losses, if they have a lot of losses, they could be paying $1.10for every dollar they bring in, they're losing money. there's some companies that may onlypay them 60 cents for every dollar they're
bringing in, they're making money.that's how they make their money: when you take everything that's paid out, all the expenses,the commissions, the operating costs, the losses that they're paying out. take all thatand once all those are paid then they have their profit. that's what they end up dispersingto shareholders or what have you. that's how they make their money.they also invest their money, life insurance companies, for example. a lot of people don'trealize this but life insurance companies are one of the largest landholders in theunited states. they buy land and with that land, they invest it and make money that way.a lot of people think they just pay their premiums, that's how they make their money.no, they go and invest those premiums.