What primary factors determine life insurance premiums?

Life insurance premiums are primarily determined by factors that assess the risk of insuring an individual. Mortality is a central element because it relates directly to the likelihood of death, which impacts the insurer's potential payout. By evaluating mortality rates based on age, health, and lifestyle, insurers can estimate the risk associated with providing coverage.

Company expenses are another critical factor because they include the costs associated with underwriting, marketing, and maintaining the insurance policies. These expenses must be covered by the premiums charged to policyholders.

Interest earned is also significant, as life insurers invest the premiums they collect in order to generate income. The returns on these investments can help offset the cost of future claims, allowing insurers to set premiums at a sustainable level.

In summary, life insurance premiums are influenced by a combination of mortality risk, the insurer's operational costs, and the potential earnings from investments. This integrated approach allows for a more accurate assessment of premiums based on the expected risk and financial needs of the insurance provider.