Mortality Table

Mortality, expenses, and investment earnings — Life insurance premiums are calculated from three components: mortality, which is the cost of death claims based on mortality tables; expenses, which are the insurer's costs of operations, commissions, and administration; and investment earnings, which are the interest the insurer earns on reserves and cash values and which offsets the other costs. The mortality charge increases with age, expenses include acquisition and ongoing costs, and the investment return reduces the net premium the insured must pay. This three-factor structure is fundamental to life insurance pricing.

National insurance concept

Mortality, expenses, and interest — The three components of a life insurance premium are mortality (the cost of the death benefit based on the mortality table), expenses (administrative, sales, and maintenance costs), and interest (investment earnings on the reserves, which reduce the premium the policyowner must pay). The higher the assumed interest rate, the lower the premium; higher mortality and expense assumptions raise it. Together these factors determine the gross premium.

National insurance concept