$500 Mortality cost
$400 Net premium
- $100 Interest+ $200 Operating cost $400 Net Premium therefore, $600 Gross Premium
Gross annual premium is the one year cost for mortality, plus expense loading. Loading includes commissions, taxes, advertising, and while not an expense, includes the amount added to a pure or basic rate to provide for a profit margin to the insurer.
Gross Annual Premium = cost of 1 year of mortality + (commissions + taxes + advertising + profit margin)
Higher Frequency = Higher Premium
Monthly > Quarterly > Semi-Annual > Annual
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