Life Insurance Guide | Insurance Help Product Information | Premium Loading

The premium calculated from mortality and interest factors is a net premium, and adjustments, or loadings, will have to be made to arrive at the actual premium chargeable.

The major loading is to cover the expenses of the life office. These would include:

  • Salaries of employees
  • Commission paid to the sellers of policies
  • Costs of office buildings used
  • Computer costs
  • Medical fees during underwriting

There will also be a safety margin to guard against higher than expected mortality and of course a profit margin. The actuary will have to include all these factors in his loadings to produce the final premium charged.