Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The gross premium for life insurance is calculated from which three primary components?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The premium reflects three actuarial assumptions: mortality (the expected number of deaths per the mortality table), expenses (administrative, acquisition, and distribution costs), and interest (the insurer's expected investment earnings, which reduce the premium needed). The applicant's age, gender, and health affect the mortality charge, but the three structural components of the premium are mortality, expenses, and interest.
Why the other options are wrong
- B) Commissions and taxes are elements inside the expense component, not separate primary components.
- C) Age, gender, and health are risk-rating factors that influence mortality, not premium components themselves.
- D) Morbidity (sickness rates) and disability are A&H pricing concepts, not life insurance premium components.
Memory hook
Premium = death costs + running costs − investment growth. Mortality, expenses, interest — the three-legged stool.