Final answer:
The primary factors considered when computing the basic premium for life insurance include the average person's claims, costs of running the company, and the firm's profits. Other factors like investment income and different risk groups may also be taken into account.
Step-by-step explanation:
The primary factors considered when computing the basic premium for life insurance include:
- 1. Average person's claims: The insurance company needs to determine the average amount of claims paid out to policyholders and factor that into the premium calculation.
- 2. Costs of running the company: The expenses involved in operating the insurance company, such as administrative costs, salaries, and overhead, are considered in determining the premium.
- 3. Firm's profits: The insurance company aims to make a profit, so they include a margin for profit in the premium calculation.
- Other factors that may be considered include investment income earned on reserves and the presence of different risk groups. For example, individuals in a high-risk group may have higher premiums due to their higher likelihood of making claims.