Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The three main components used by an insurer to determine a life insurance premium are:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Life insurance premiums are built from three core components: mortality, the expected cost of deaths based on the mortality table; expenses, the insurer's administrative, sales, and operating costs; and investment earnings, the interest the insurer expects to earn on reserves, which reduces the premium. These elements are combined into the net premium plus loading. Factors like age and gender influence the mortality component but are not the premium components themselves; morbidity is a health-insurance concept.
Why the other options are wrong
- B) Age, gender, and occupation are risk-classification factors that shape the mortality component, not the three premium-building blocks.
- C) Morbidity is the disability and health insurance pricing factor; commissions are part of expenses but not a co-equal premium component.
- D) Inflation and reserves are considerations within pricing but are not the standard trio of premium components.
Memory hook
Premium = mortality + expenses − investment interest. Death cost, running cost, and interest working for you.