Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The gross premium for a life insurance policy is primarily built from which three components?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Life insurance pricing rests on three elements: mortality (the cost of anticipated death claims based on the mortality table), expenses (acquisition, administration, and maintenance costs), and interest (investment earnings credited to reserves, which reduce the premium needed). These components form the basis of rate making described in objective LIFE-II.I.4.
Why the other options are wrong
- B) Claims costs are captured in mortality; underwriting fees and dividends are not the three primary pricing components.
- C) Face amount, cash value, and loans are policy features, not premium components.
- D) Commissions are part of acquisition expenses, but surrender charges and taxes are not the foundational pricing trio.
Memory hook
Price = mortality + expenses minus interest. Three inputs, one premium.