[ljd]

I could be wrong, but I believe insurance companies don't charge more than they pay out. That instead, your premium is equal to how much their actuary tables say they'll have to pay for someone with your level of risk.

They make all their money through their investment portfolio. Essentially, they earn interest on your premium until they have to pay it out.

[masterzora]

In general, insurance companies derive profit both from taking in more than they pay out and from investing what they take in. Historically speaking the idea is for the insurer to have a positive expected value on the premium alone but some companies (and possibly entire types of insurance? I'm not an expert by any means) these days are willing to lessen underwriting profits in exchange for market share and, therefore, more investment money.

[qq66]

Even still, it would be a negative expected value play for the insured, since they give up the investment returns on their premiums to the insurance company.