Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Life insurance premiums are derived from which three main components?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
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.
Why the other options are wrong
- B) Morbidity is the pricing basis for disability and health insurance; life insurance pricing uses mortality.
- C) Age, gender, and health are risk classification factors that influence which mortality rate applies, but they are not themselves the three pricing components.
- D) Premium taxes and commissions are only a portion of the expense component, not the full pricing structure.
Memory hook
Three pricing engines: mortality burns, expenses eat, interest earns. Interest is the only one that lowers your bill.