Question

How are rates and premiums related in insurance?

a.

Rates determine the probability of loss, while premiums cover the cost of claims.

b.

Rates and premiums are the same thing.

c.

Premiums are calculated by multiplying the sum insured by the rate.

d.

Rates are calculated based on policy wordings.

Posted under IC38 Life Insurance Agent Exam

Answer: (c).Premiums are calculated by multiplying the sum insured by the rate. Explanation:Premiums are calculated by multiplying the sum insured by the rate, where the rate is the price of a given unit of insurance.

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