Why is the premium for policy A higher than that for policy B in mortgage protection?

The premium for policy A is higher than that for policy B because policy A provides higher coverage over the policy term. In life insurance products like mortgage protection, the level of coverage directly impacts the premium rates. When a policy offers a higher sum assured or cover amount, the insurer faces greater potential liability, which typically results in higher premiums to reflect that increased risk. Therefore, if policy A offers more substantial financial protection than policy B, it is justifiable for it to have a higher premium.

In contrast, higher premiums wouldn't correlate with lower coverage or uncertainties in mortgage interest rates, as those factors do not inherently influence the amount of risk that the insurer is taking on for the policyholder's life coverage. Hence, the amount of cover directly linked to the risk assessed by the insurance company is the reason for the difference in premiums between the two policies.