How Insurance Companies Make Money On Annuities. This is the simple answer. After a period of time, the insurance company will make payments to you under the terms of your contract.
Simply put, an insurance company makes money on the spread between its investment yield and the interest it credits to contract owners. This is the simple answer. To make money, the insurance company has to charge each building client enough for their insurance to pay off the probable $1 million loss, plus some additional amount calculated by its actuaries.