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In: Finance

Discuss the building blocks of an insurance premium.

Discuss the building blocks of an insurance premium.

Solutions

Expert Solution

Insurance premium depends on the perceived risk by the insurer for the insured person/company.

Below are the factors on which insurance premium depends:

1. Probability of event (e.g. death for term insurance, illness for health insurance etc.)

2. Age of the person (for more aged person more risk is involved and higher premium)

3. Income of the person (more income less risk and lesser premium and vice versa)

4. Habits of the person (Smokers has more risk than a non smoker)

5. Tenure and sum assured of the insurance etc. are the building blocks of an insurance premium.

jeff jeffy answered 2 years ago
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