Attained age refers to an insured individual’s age at a specific point in time, particularly significant in the context of insurance policies, particularly life insurance. For instance, many term life insurance policies permit insureds to convert their policies to permanent insurance without undergoing a physical examination, based on their attained age at the time of conversion. This flexibility often results in an increase in premiums to accommodate the insured’s elevated age and reduced life expectancy.
Importance in Term Life Insurance
Conversion to Permanent Insurance
In term life insurance policies, the provision to convert to permanent insurance is often a key feature:
- No Medical Examination: Conversions are allowed without a physical examination, essential for those whose health may have declined.
- Premium Adjustments: Premiums typically rise significantly upon conversion due to increased age and mortality risk.
Example Scenario
For example, a 45-year-old individual who purchased a term life insurance policy at age 30 can convert their policy to permanent insurance at the attained age of 45 without undergoing a medical exam. However, their premium will increase to reflect the increased age and associated risk.
Economic and Financial Considerations
Prohibitive Costs
As individuals age, the costs associated with converting term life insurance policies to permanent insurance can become prohibitive:
- Higher Premiums: The added cost often deters many insureds from making the conversion.
- Life Expectancy: Insurers adjust premiums based on diminished life expectancy, further increasing costs.
Historical Context
The concept of attained age in insurance has evolved to offer more flexible options for insureds as they age, adapting to changes in health and risk profiles. Historically, without such provisions, insureds faced more rigid policies and potential loss of coverage.
Applicability and Comparisons
Related Terms
- Issue Age: The age at which an individual initially purchases an insurance policy.
- Entry Age: Often synonymous with issue age, indicating the age when insurance coverage begins.
FAQ
Q: What is the difference between attained age and issue age? A: Attained age refers to the insured’s age at a given time, whereas issue age is the age at policy issuance.
Q: How does attained age affect insurance premiums? A: Premiums increase with attained age due to higher risk and shorter life expectancy.
References
- “Life Insurance Handbook,” by Joseph M. Belth
- “Principles of Insurance,” by George E. Rejda
- National Association of Insurance Commissioners (NAIC) reports
Summary
Attained age is a critical concept in the insurance industry, affecting the conversion of term policies to permanent ones and the resulting premium adjustments. Understanding the implications of attained age helps insureds make informed decisions regarding their policies and financial planning.
