How does the Mortality Factor affect insurance premiums?

The Mortality Factor plays a crucial role in determining insurance premiums because it assesses the risk of death for an individual based on various factors, primarily age and health status. Insurance companies use mortality tables to predict the likelihood of policyholders passing away within a certain time frame. As individuals age, the risk of death typically increases, which in turn raises the cost of premiums. Similarly, individuals with health issues may also face higher premiums due to their increased risk.

By considering both age and health, insurers can more accurately price their products to reflect the anticipated costs associated with providing coverage. Consequently, premiums are generally higher for those who fall into higher-risk categories based on that mortality assessment. This risk management approach ensures that the insurance company can cover its future liabilities to policy beneficiaries while remaining financially viable.