In an insurance program, which is considered an expense factor affecting premiums?

• A. Surrender charges
• B. Mortality costs
• C. Interest on policy loans
• D. Administrative costs

Answer: (B)

Mortality costs are the part of a life insurance premium that reflects the insurer’s risk of paying a death benefit. This cost is calculated using mortality tables and the policy’s face amount, and it directly drives how much premium is charged because it funds the expected payoff to beneficiaries. As the risk of paying claims increases (for example, with age or higher benefit amounts), the mortality cost rises, and so does the premium.

Surrender charges aren’t part of ongoing premium calculations—they’re fees assessed if the policy is surrendered early. Interest on policy loans is a separate loan cost charged to the borrower, not a factor used to set the regular premium. Administrative costs are included in the premium as a general expense load, but the primary expense factor tied to the amount of the death benefit itself is the mortality cost.