Anonymous asked in Business & FinanceInsurance · 7 years ago

How do Insurance companies make money off of you? 10 points, best answer.?

I'm a little curious as to how insurance companies like "Farmers" or something like that make money? The agents too. Don't they get paid not by the hour but by commission? What do you need to look out for when applying?


**When applying for insurance, like life/car/health.

5 Answers

  • 7 years ago
    Best Answer

    many companies pay their agents based off of commission thiese commissions are not limited to the point of sale only, they are payed out every year that a client renews their policy.

    now many insurance companies make their money off of investment accounts IRA's, life insurance plans, mutual funds etc. they take that money and they invest it themselves to gain a higher profit.

    other ways these companies make money is buy charging premiums to the customer they have a very watchful eye on the amount coming in and the amount being paid out. if there is any fluctuation they can raise the premiums or the can lower the premiums.

    now being that their is always a risk that people will shop around for other insurance prices companies will always reward clients for their continuous coverage with a company.

    now the things to look out for I'm a little confused but I'll answer to my best understanding. when signing a client every policy has things that need to be checked.

    auto- miles vin driver(s) is it garaged does it have any previous damage. also some companies require agents to take photos for proof and fraud reasons.

    home- some companies require photos others send inspectors, discounts for homes are alarm systems, cameras systems, 2 or more adults, no dangerous pets, sprinkler system, central heating.

    life- most companies have different types of polices 2 major types being term and whole life

    term- 10yr 20yr 30yr can chose amount of time you want. can be a simple policy or universal policy. a simple policy is what it sounds like only have about 10 questions to fill out and your the owner of a life insurance policy a universal policy requires a doctors visit and blood test and urine sample.

    whole life- self explanatory policy that you keep for your whole life or if you life until you reach 100 the company will cut you a check for the amount of your policy (happy 100th birthday) generally more expensive then a term policy because they have higher payouts. also have the options of simple of universal.

    i think that answers your questions

    Source(s): california state licensed insurance expert. used to work for (Farmers)
  • 7 years ago

    The insurance companies make the majority of their profits, off of investment income. They are required to put billions of dollars off to the side to pay future claims, and are allowed to invest that money conservatively, in bonds. (That's why, when interest rates go down and stay down, insurance premiums go up - there's not enough interest income to subsidize the premiums being charged.)

    Agents get paid commission only. If they don't sell a policy, they don't get paid. Your agent cannot give you any commission back - that's called rebating, and is illegal.

    What you need to "look out for", is coverages. You don't need to worry about what the agent is making, you have no control over that.

  • Zarnev
    Lv 7
    7 years ago

    They make money by charging a premium. Agents with many, but not all, companies only get commission.

    Applying for what? A job or for insurance?

    EDIT for your additional details: you need to make sure you tell the truth and answer all questions honestly. Other than that there is nothing else to look out for.

    Source(s): Independent Ägent
  • 4 years ago

    Lots of people go far away for college. You probably could get home more often than once a year - probably Christmas and spring breaks, plus the summer. There are quite a few universities in the LA area to choose from, with different costs and levels of competitiveness for admission. Bear in mind that as a non-California resident (at least for the first year), you would be subject to higher tuition at any of the public universities, so cost might become an issue. LA is not really known as a publishing center - the entertainment and aerospace industries are big here - I think of New York for that, but I suppose there are magazines published from everywhere these days. Another thing to remember is that living somewhere is quite different from being there on vacation. All of California, Los Angeles especially, is crowded and expensive. That doesn't matter very much when you are on vacation, but it can make a big difference when you come to live. It's true the weather in LA is near ideal, that's one of the main reasons that there are now 38 million people living in California (nearly 1/8 of the entire US population). There are about 4 million in the City of Los Angeles and over 10 million in LA County. Some days it seems all of them are on the freeway at the same time. Anyway, your idea is not crazy - lots and lots of people have done exactly that - but living in LA may not be quite the life in paradise you imagine, so think about other options too.

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  • Anonymous
    7 years ago

    It is fairly simple, they charge by each month and invest most in a account (that account is for when you need the money) and they take what is left as profit. They also use some of their money when needed and still make enough from all their customers. That's also why you don't see small shitty insurance company's

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