How do they set a price for life insurance?
Although there may be a myriad of fees, expenses, interest assumptions, and other factors used to develop a given life insurance company’s premiums for a policy, the rates for life insurance are ultimately based upon one factor the statistical chances of the insured dying in a given year. Such statistics, based upon insurance company experience and government records, are used to calculate an annual death costfor each $1,000 of life insurance benefit. Since statistically few people will die at younger ages, the death cost for those years will be extremely low. As people age, the statistical chance of death increases slowly at first, then more rapidly after the insured passes middle age and therefore so does the annual death cost.
