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  • How to determine the performance of a life insurance policy
  • July 22, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    When determining the performance of a life insurance policy, there are four components to take into consideration, which are directly related to the actual premium you pay.

    The premium you pay on your life insurance policy may fluctuate from year-to-year if any of these four components change; they are mortality, administrative expenses, interest rates and persistency.

    Mortality experiences improves or worsens

    A change in mortality doesn’t occur very often, but has a dramatic effect when it does happen.

    Expenses grow or are reduced

    Administrative costs include all the operating costs it takes your life insurance company to operate. Increases or decreases to this figure could not only affect the company, but also your premium.

    Interest credits rise or fall

    Out of all the components, this one changes fairly frequently. Depending on what type of policy you have, this frequent change could have a small to large influence on the premium you pay.

    Persistency increases or decreases

    This figure is determined by the success or failure of your life insurance company. If they keep policies from lapsing, it will benefit both the company and your policy. But, if most of their policies lapse at an early stage, your policy and the company could see repercussions.

    Your premiums may potentially reduced if:

    · Mortality experiences improves

    · Expenses drop

    · Interest rates rise

    · Persistency is stable

    Conversely, your premium may potentially increase if:

    · Mortality experiences worsens

    · Expenses increase

    · Interest rates decrease

    · Persistency is negative

    If you seek further assistance or additional information, please feel free to email me at

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

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Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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