PSI Life Exam Practice Test 2026 - Free Life Insurance Exam Questions and Study Guide

The chosen answer is accurate because life insurance premiums are calculated based on several critical factors that assess the risk posed to the insurer. Age is a significant factor since younger individuals generally present less risk than older individuals. Health status is equally important, as pre-existing conditions can affect life expectancy. Lifestyle choices, such as smoking or engaging in high-risk activities, also play a crucial role in determining premiums, as they can increase the likelihood of claims. Lastly, the amount of coverage requested directly impacts the premium, with higher coverage resulting in higher premiums due to the increased risk to the insurer.

While occupation, marital status, geographical location, and family history may influence premiums to some extent or be considered in specialized scenarios, they are not the primary factors that insurance companies use in determining life insurance costs. Thus, the comprehensive view of age, health, lifestyle, and coverage amount provides the most accurate framework for understanding how life insurance premiums are calculated.