California Insurance License Exam Practice Test Practice Question
The components of determining policy premiums include all of the following EXCEPT
Correct Answer: A
Rationale: In determining policy premiums, dividends are not a direct component; they are a return of excess premiums to policyholders, reflecting the insurer's profitability. Insurer expenses (B) are essential as they cover operational costs that must be factored into premium calculations. Investment return (C) is also crucial, as it influences the insurer's ability to offset costs and provide coverage. Mortality cost (D) represents the risk associated with policyholders' lifespans, directly impacting premium rates. Thus, dividends stand apart as they do not contribute to the initial premium calculation.
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