Definition
Attained Age refers to the age of the insured at a particular point in time. It is commonly used in the context of life insurance policies, particularly when discussing the conversion of term life insurance to permanent life insurance. When a term life insurance policy allows for conversion without requiring a new physical examination, the converted policy’s premium is calculated based on the insured’s attained age at the time of conversion.
Examples
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Conversion to Permanent Insurance: Jane has a term life insurance policy that allows her to convert to a permanent policy without a health examination. She decides to convert at age 40 (her attained age). As a result, her new premium will be higher than it was for her term policy because it reflects her age of 40 and the associated higher risk.
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Rate Calculation: John buys a term life insurance policy at age 30. At age 45, he converts his term policy to a whole life policy. The premium for the whole life policy will be based on his attained age of 45, taking into account his life expectancy and the increased risk the insurer assumes.
Frequently Asked Questions
What is the significance of attained age in life insurance?
Attained age is crucial in life insurance because it determines the premiums for converted or renewed policies, reflecting the increased risk and diminished life expectancy as the insured ages.
Can I avoid the higher premiums associated with attained age?
You cannot avoid the higher premiums entirely, but you can plan by converting your policy earlier when your attained age is lower, resulting in relatively lower premiums compared to converting later.
Is attained age used in other types of insurance?
Attained age is primarily used in life insurance, but it can also play a role in other types of insurance where age-based risks are considered, such as health insurance and long-term care insurance.
How does attained age impact policy conversions?
When converting a term policy to a permanent policy, the attained age determines the new premium, which generally increases due to the higher risk associated with older individuals.
Term Life Insurance:
A life insurance policy that provides coverage for a specified term. Premiums are usually lower but do not accumulate cash value.
Permanent Life Insurance:
A life insurance policy that provides lifelong coverage and accumulates cash value over time. Premiums are higher than those for term life insurance.
Premium:
The amount an insured pays regularly to the insurer to maintain coverage under an insurance policy.
Life Expectancy:
The statistical measure of the average time an individual is expected to live, influenced by various factors including age, health, and lifestyle.
Online References
Suggested Books for Further Studies
- “The Life Insurance Handbook” by Arnold S. Mortiz
- “Life Insurance: A Consumer’s Handbook” by Joseph M. Belth
- “Insurance and Risk Management” by Monte Carlo Simulation Team
Fundamentals of Attained Age: Insurance Basics Quiz
### What does "attained age" refer to?
- [x] The insured's age at a specific point in time.
- [ ] The age when the insured first buys a policy.
- [ ] The age when the insured retires.
- [ ] The insurer’s average age of policyholders.
> **Explanation:** Attained age refers to the age of the insured at a particular point in time, which is crucial for calculating premiums in policy conversions.
### How does attained age affect term to permanent life insurance conversion?
- [x] It increases the premium based on the insured's current age.
- [ ] It decreases the premium to attract more conversions.
- [ ] It remains the same as the initial premium for term insurance.
- [ ] It is not considered when converting policies.
> **Explanation:** When converting from term to permanent life insurance, the premium is recalculated based on the insured's attained age, usually resulting in a higher premium.
### Why do many insureds avoid attained age conversions later in life?
- [x] Because premiums become prohibitive as they age.
- [ ] Because the insurance coverage decreases.
- [ ] Because they prefer to renew term insurance.
- [ ] Because physical examinations are required.
> **Explanation:** As individuals age, premiums based on attained age increase significantly, often making it financially prohibitive to convert policies later in life.
### What type of insurance uses attained age to calculate premiums for policy conversion?
- [ ] Auto Insurance
- [ ] Health Insurance
- [x] Life Insurance
- [ ] Property Insurance
> **Explanation:** Attained age is commonly used in life insurance to calculate the premiums when converting a term policy to a permanent policy.
### Can attained age affect premium rates in health insurance?
- [x] Yes, age-based risks are considered in health insurance.
- [ ] No, attained age is not relevant to health insurance.
- [ ] Only if the policy is converted.
- [ ] Only in specific regions.
> **Explanation:** Attained age can impact premium rates in health insurance, as it reflects the changing risk profile of the insured as they age.
### What is generally the result when converting a policy based on attained age?
- [ ] Lower premiums
- [ ] Unchanged premiums
- [x] Higher premiums
- [ ] Immediate coverage lapses
> **Explanation:** Converting a policy based on attained age generally results in higher premiums to reflect the increased risk and diminished life expectancy.
### What type of insurance policy typically allows conversion based on attained age?
- [x] Term Life Insurance
- [ ] Property Insurance
- [ ] Auto Insurance
- [ ] Disability Insurance
> **Explanation:** Term life insurance typically allows for the conversion to permanent life insurance based on the insured's attained age.
### Why is it advantageous to convert a term life policy at a younger attained age?
- [x] Premiums are lower.
- [ ] Coverage is increased.
- [ ] Health examinations are waived.
- [ ] The policy terms are extended.
> **Explanation:** Converting at a younger attained age leads to lower premiums compared to converting at an older age when the insured's risk is higher.
### What factor directly impacts the premium calculation during policy conversion?
- [x] The insured's attained age
- [ ] The policy's original inception date
- [ ] The insured's total coverage amount
- [ ] The policy’s cash value
> **Explanation:** The insured's attained age directly impacts the premium calculation during policy conversion, reflecting the increased risk.
### In which insurance sector is the concept of attained age least relevant?
- [ ] Life Insurance
- [ ] Health Insurance
- [x] Auto Insurance
- [ ] Long-term Care Insurance
> **Explanation:** The concept of attained age is least relevant in the auto insurance sector, as premiums are generally not age-based in the same manner as life or health insurance.
Thank you for exploring the concept of attained age and engaging with our quiz on insurance basics. Keep enhancing your knowledge to make informed decisions about your insurance needs!
