While going for a life insurance policy, I came across a term mortality charges. What is it and how is it calculated?
Gurmeet Singh, Chandigarh
At the time of buying a life policy, insurers levy a charge for the insurance protection, including certain expenses, which are known as mortality charge. It is the actual cost of insurance by the life insurance company. In insurance parlance, mortality is calculated per thousand of sum at risk. Higher the sum at risk, higher is the charge. Mortality charges are linked to the average Indian life expectancy ratio, and takes into account factors such as gender, which is why many insurers offer policies to women at a lower premium compared to men, when everything else remains the same. Insurers follow the mortality table that is shared by the IRDAI to arrive at their premium rates on policies offered by them. Although mortality charges increases every year with the increase in age but, the premium does not get effected because the actuaries factor the increase at the time of issuing the policy.
