Which factor is essential to determine the premium of a life insurance policy?

The premium of a life insurance policy is fundamentally influenced by the applicant's age and health status. These two factors are critical because they provide insurers with insights into the risk associated with insuring an individual.

As age increases, so does the risk of health issues and mortality. Therefore, younger applicants typically pay lower premiums compared to older individuals. Health status is equally important; applicants with pre-existing conditions or poor health are perceived as higher risks, which may lead to higher premiums. Conversely, those in good health can benefit from lower premiums due to a lower likelihood of filing a claim.

While other factors like credit score, occupation, and geographical location can play a role in determining premiums, they are secondary in comparison to the direct impact of age and health. For example, an occupation may increase risk but does not override the fundamental assessment of age and health.