Final answer:
The component that fluctuates in term life insurance policies depending on the policy type is the premium. Term life insurance only offers a death benefit for a set term and does not have a cash value, unlike whole life insurance which has both. Insurers set premiums based on risk, which can lead to different pricing if information about risk factors, like family cancer history, is not available.
Step-by-step explanation:
In term life insurance policies, the policy component that fluctuates depending on the policy type is b. Premium.
Premiums are calculated based on a variety of factors including the policyholder's age, health, lifestyle, and the term length of the policy. Cash-value life insurance, such as whole life insurance, combines a death benefit with a cash value component, which serves as a financial account for the policyholder's use. In contrast, term life insurance provides coverage for a specific period and does not accumulate cash value. When determining an actuarially fair premium for policyholders, insurers assess the risk associated with each individual or group. For example, if an insurer cannot differentiate between groups with different risk profiles due to a lack of information on family cancer histories, they would calculate an average premium for the entire group, leading to potential implications such as adverse selection. Moreover, charging an actuarially fair premium to the entire group can result in losses for the company if high-risk individuals are undercharged and low-risk individuals are overcharged.