Life Insurance FundamentalsQuestion 148 of 716
When the insurer assumes a higher rate of interest will be earned on policy reserves, the effect on the gross premium is generally:
a.Premium can only be set by state law, so no change
b.No change
c.Higher premium
d.Lower premium
Explanation
Interest is one of the three premium factors. A higher assumed interest rate means the insurer expects to earn more on reserves, so less premium is needed from the policyowner. The other factors (mortality and expenses) work in the opposite direction.
Law Reference: Standard insurance principlesThis topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
Practice all 716 questions free — no signup required.
Own the complete California Life & Health Insurance Producer Exam guide — PDF + EPUB, $19.99 →
Related questions on this topic
- How is interest credited to the cash value of a traditional whole life policy generally treated for income tax purposes while the policy is in force?
- What document must be delivered to a prospect at or before the sale of a variable life or variable universal life policy?
- Which of the following is a category in which insurable interest in another person's life is generally recognized?
- Which feature of an Annual Renewable Term (ART) policy makes it different from a level term policy?
- Which of the following BEST illustrates 'return-of-premium term' insurance?
- An applicant is found to be in such poor health and high-risk occupation that the insurer will not issue a policy at any price. The applicant's status is:
Last reviewed: · editorial process
PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)