Which component is NOT part of the premiums of a life policy?

The correct answer addresses an important aspect of how life insurance premiums are structured. Premiums for a life insurance policy consist of several components that reflect the cost of providing coverage, among other factors.

Mortality adjustments are included in the premium calculation since they account for the risk of the insured dying during the policy term, which is a core element of life insurance. Interest adjustments also play a role in determining premiums, as they consider the time value of money—essentially, how much the insurer can earn on the premiums collected before claims are paid.

Administrative fees are legitimate costs incurred by the insurance company in managing the policy, therefore they are included in the overall premium.

Claims payments, on the other hand, are the amounts the insurance company pays out upon the death of the insured. These payments do not form part of the premiums; instead, they are liabilities that the insurer meets when claims arise. As such, claims payments are not included in the calculations that determine how much a policyholder pays for their life insurance. This distinction is crucial in understanding the difference between premium components and actual claim costs, reinforcing the correct choice.