Life Insurance Basics
Which three factors determine the premium an insurer charges for a life policy?
Answer and explanation
Answer: A. The gross premium starts with expected mortality, is reduced by the interest the insurer expects to earn before benefits are paid, and is loaded for expenses. Morbidity applies to health insurance, and persistency and dividends affect results rather than the basic pricing structure.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, premium factors
More life insurance basics questions
- How does the needs approach differ from the human life value approach?
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- How must a producer handle a premium collected from an applicant?
- If an insurer's expected investment return rises, what happens to the premium, other things being equal?
- In a corporate key-person life insurance arrangement, who is the policyowner, premium payor, and beneficiary?
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