California Life and Health Insurance Practice Exam 2026 – Your All-in-One Guide to Exam Success!

The premium of a life insurance policy is primarily determined by the age and health of the policyholder. This is because younger and healthier individuals typically present a lower risk for the insurance company, leading to lower premiums. Age is a crucial factor, as mortality rates increase with age, and insurers use actuarial tables to estimate the likelihood of a policyholder's longevity. Additionally, health status plays a significant role in determining premiums; individuals with pre-existing conditions or poor health may face higher premiums due to the increased risk associated with insuring them.

In contrast, the type of coverage selected does influence premiums, but it is not the sole determinant. Coverage types may vary in their risk and benefits, leading to different pricing structures. Insurance agents' commissions are part of the operational costs but do not directly influence the premium rates of individual policies. Finally, while an insurer's market share can reflect its pricing strategy, it does not directly determine the amount an individual policyholder will pay for their premium. Together, age and health create a personalized risk assessment that informs the premium calculation for that specific life insurance policy.