Life Insurance Premiums are calculated on three factors: mortality, interest, and expense.
Mortality tables are used to determine average life expectancy, which in turn allows underwriters to give the policy a health rating that factors into the cost. The lower the underlying mortality assumption, the better the health rating and the lower the premium.
Interest is the return on your premiums invested by the life insurance company.
Expense is the costs involved with issuing that policy, including overhead, salary, commissions, supplies, etc.
All these together are considered in determining what rate to charge you for your policy.
Life insurance is a complex, sometimes convoluted calculation, especially depending on the product line. Participating whole life insurance is a bundled product that has never been unpacked to the satisfaction of those who perform product due diligence. Term and universal life are more forth coming and have determents that can be identified like the mortality charges, admin costs, policy fees and the crediting rate…whether interest, indices or separate subaccounts.
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Mortality tables are used to determine average life expectancy, which in turn allows underwriters to give the policy a health rating that factors into the cost. The lower the underlying mortality assumption, the better the health rating and the lower the premium.
Interest is the return on your premiums invested by the life insurance company.
Expense is the costs involved with issuing that policy, including overhead, salary, commissions, supplies, etc.
All these together are considered in determining what rate to charge you for your policy.