Question 83

Mortality is the component of a life insurance premium based on the insured's age and gender.

The mortality component of a life insurance premium reflects the likelihood of death within a specific timeframe, which is significantly influenced by the insured's age and gender.

A) Expense

The expense component of a life insurance premium pertains to the operational costs incurred by the insurer, such as administrative expenses and commissions. While these costs affect overall premium pricing, they do not directly relate to the insured's age or gender.

B) Interest

The interest component reflects the earnings that the insurer expects to generate from investing the premiums collected. This component is not influenced by the insured's age or gender, making it irrelevant to the question.

C) Morbidity

Morbidity refers to the incidence of disease and health-related issues, which affects premiums for health insurance but is not directly related to life insurance premiums. Therefore, it does not factor into the calculation based on age and gender.

D) Mortality

Mortality is the correct component, as it estimates the risk of death based on statistical data tied to age and gender. Insurers use mortality tables to determine the likelihood of policyholders passing away, which directly informs the premium rates charged.

Conclusion

Mortality is the key factor in determining life insurance premiums based on an individual's age and gender, as it directly assesses the risk of death. The other options, while related to insurance, do not pertain to the specific attributes of the insured that influence premium calculations. Hence, mortality is the definitive answer in this context.