A life insurance company insures a large number of people with the knowledge that only a small proportion of them will die in any one year. The large number of premiums provides the funds to pay for the small number of deaths. This is

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Risk pooling is the concept of distributing the risk among a large number of people to reduce the impact of losses on any one individual. In the case of life insurance, the premiums paid by a large number of people are pooled together to cover the losses of the few who will die in any given year. This allows the risk to be spread out, making it more manageable for the insurance company and the policyholders.

A Life Insurance Company Insures a Large Number of People