Policy prices are calculated with intent to fund claims to be paid, make profit and cover administrative costs. Mortality tables which derive life expectancy estimates are used as basis for cost. Three main variables in a mortality table are gender age and the use of tobacco. The mortality table provides the baseline for the cost of insurance. Newer mortality tables provide separate computations for smokers and non-smokers. Administrative and sales commissions are part of the formula since this is a business. Taking into account all the risk factors, the insurance company can now give you a more accurate computation of the annual cost of your life insurance coverage. Link
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