On what basis is the whole life insurance premium calculated?

The premium for whole life insurance is primarily calculated based on the guaranteed death benefit and mortality costs associated with the insured individual. This is because whole life insurance provides a permanent death benefit, meaning that the insurance company must factor in the cost of covering that benefit upon the death of the insured.

Mortality costs refer to the expected rate of death among policyholders, which is a crucial component in determining how much premium should be charged to ensure that the insurer can meet its obligations to beneficiaries. The premium must be sufficient not only to cover the expected claims due to death but also to accumulate cash value within the policy over time.

While the current interest rates or expected return on investment may influence other types of insurance products or the total cash value growth, they do not form the primary basis for calculating the premiums of whole life insurance. Similarly, the market value of the policy is not a determinant in premium calculation; rather, it's the inherent structure and guarantees of the whole life product that guide the premium setting process.