Connecticut Life Producer Practice exam

Which of the following factors does NOT determine the premium for a particular insurance policy?

1. Mortality

2. Interest

3. Occupational hazards

4. Expense

The correct answer is: Occupational hazards

The premium for an insurance policy is influenced by several key factors that help insurance companies assess risk and ensure they can cover potential claims while remaining financially viable. Mortality, interest, and expenses are all essential components in determining how much a policyholder will pay. Mortality refers to the likelihood of death within a certain age group or demographic. This statistic is critical for life insurance premiums, as it helps insurers estimate how much they might pay out in claims. Interest comes into play as insurance companies invest premiums to generate returns. The anticipated interest earnings can offset the cost of claims, thus influencing premium pricing. Expenses include the operational costs of maintaining the insurance policy, such as administrative expenses, commissions, and other overhead costs associated with underwriting and claims processing. These costs must also be factored into the premium rate. Occupational hazards, while they can indicate higher risk and thus potentially affect premiums, are not a determinant of the premium in a broad sense like the other factors. Therefore, they do not universally apply across all policies, especially not in determining life insurance premium rates for all applicants. This is why this factor is indicated as the one that does not play a direct role in determining the premium for a policy.