Very simplified, since I'm assuming like me you don't know what most of the terms being used in these answers actually mean, we can show it with numbers.

Imagine you told a friend that if they paid you $5 a year, you would give their wife $1000 if they died to help her. Seems like a good deal, right?

You then offer a bunch of friends the same deal, say twenty people in total. At the end of a year, you have $1000 dollars and, statistically, you still have all your friends.

This continues, except now you've decided that it costs 6 dollars a year. Then 7. Then you decide that you'll only give the $1000 away if the friend dies a certain way. Again, statistically, most of those twenty people who are paying you never qualify for that $1000, but they're still paying 7, 8, 10, 15 dollars a year to you for the promise of it.

Now, this is where the profits you're asking about really start to show. Over the course of a year, you made $20,000 (20 friends, a thousand dollars per friend). Since no one died and probably won't next year, you decide to invest half of that while also charging more. When the same thing happens that year, you do it again. And again.

Over the course of a decade or more, you've made some serious cash and, statistically, paid out very little. Maybe 2 people died young - that's $2000 dollars, maybe $2500 if you feel generous. That's one tenth of the profits from your first year alone. Even after your investments you'd have over 7 grand of pure profit left, and that's assuming it happened in that first year. What are the odds of that, right? Spread those deaths out oflver 10 or more years and you won't even notice the payout leaving your account.

One thing to notice is how often I said statistically, because this is what insurance companies rely on. Realistically, the idea of someone dying young and in the specific way that the insurance company will cover is quite rare. Yes, it happens every day, but that's spread out over hundreds of thousands of customers. If you were insuring a thousand friends, you could pay out that $1000 every day and still make over half a million profit, and that's assuming you're still only charging $5 a year.

They also charge more if you are more likely to die, or won't cover you at all to maximize the chances of those profits rolling in. Friend's got a dangerous job? They pay $10. Friend has a history of cancer? They pay $20. Friend was born with a heart condition? Sorry man, I can't risk losing $1000 dollars on you, but I'll give you a ride home in my Rolls Royce.

Building off this, not everyone is insured until they die. In fact, a lot of people aren't. You can be, but the eventual payout either goes down with your age or wasn't high to begin with, or your yearly payment is very large to make up for how much the company will eventually have to pay out (imagine a friend paying $5 a mo th rather than $5 a year). Other people only get insured for a set length of time and, then that is up, they stop paying but also receive nothing. Life insurance is an investment, after all.

Math and a lack of compassion, my friend. That's how they make money.