What are the primary factors included in life insurance premium calculations?

The primary factors included in life insurance premium calculations are mortality, interest, and expense.

Mortality refers to the estimated probability of death within a given period and is a key component in determining the risk of insuring an individual. Insurance companies calculate how much they expect to pay in death benefits, based on the mortality rates for different age groups and health statuses.

Interest is considered because insurance companies invest the premiums collected to earn returns, which can offset the payouts for claims. The interest rate affects the insurer's ability to generate revenue from the premiums before they are needed to pay claims.

Expense factors account for the administrative costs associated with selling and managing the life insurance policies. This includes commissions to agents, marketing costs, and operational expenses, all of which influence the overall premium charged to policyholders.

Together, these three factors help insurance companies determine a premium that adequately covers risks while remaining competitive in the market. Understanding these concepts is crucial for grasping how premiums are calculated and the financial principles that underpin life insurance products.