How To Determine the Performance of a Life Insurance Policy

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.

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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 be 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

These four components are the key to determine the performance of a life insurance policy

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

Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit to join the GET READY! Financial Preparedness Club and access free resources.

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