Question

What is the significance of investment income in the premium calculation?

a.

It determines the coverage limits and deductibles

b.

It influences the time value of money in premium calculations

c.

It determines the pricing of individual risk exposures

d.

It factors in the anticipated investment income as a separate premium component

Answer: (b).It influences the time value of money in premium calculations Explanation:Investment income earned during the policy period can have a considerable influence on premium calculations. The time value of money, which includes investment income, is factored into the premium calculation. This is particularly relevant in multiyear finite-risk policies, where the anticipated investment income is acknowledged as an underwriting component.

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Q. What is the significance of investment income in the premium calculation?

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