The premium that is applicable for Life Insurance is dependant on two concepts that is related to mortality and interest. There is another important factor that is associated with it, which is known as the expense factor. Expense factor refers to the amount that is related to the cost of the different policies, and other selling and operating costs that can be associated to the paying of claims. Life Insurance refers to sharing of the risk, by many people. There are different mortality tables that provide the company a rough estimate of the money that is required to be paid in case of any death that may occur.
The earnings through interest is an important factor that is considered, while making a calculation. There are companies, making investments in different kinds of bonds, mortgages and stock, with an assumption that the company will be earning huge interests through these investments.
Expense is a factor that is taken in consideration, while determining the insurance policy amount. The company has many expenses in the form of salaries, compensation of the agents, different rents and legal fees, which the authorities can estimate well in advance. There is an amount that covers, the expenses portion of any policy, and this is referred to as expense loading. These costs vary from company to company, and are totally based on the operations and efficiency of the company.
