Pearson VUE Life Insurance Practice Exam

The correct answer identifies several key factors that significantly influence life insurance premiums.

Age is a critical factor, as insurance companies generally consider younger individuals to be lower risk for policy payouts, while older individuals may face higher premiums because they are statistically more likely to pass away within the policy term.

Health history is also essential; individuals with pre-existing conditions or a history of serious health issues might be charged higher premiums. A person’s current health status and medical records play a major role in assessing risk.

Lifestyle choices further impact premiums as well. Habits such as smoking, excessive alcohol consumption, and high-risk activities (like parachuting or racing) can increase the likelihood of health complications or untimely death, leading to higher costs for coverage.

Lastly, the amount of coverage sought directly correlates with the premium. A larger coverage amount means higher financial risk for the insurance company, which results in an increased premium to offset that risk.

Together, these elements create a comprehensive picture of an applicant's risk profile, guiding the insurance provider in setting appropriate premiums.