3 Ages In Life Insurance: Original, Attained, & Basis
In life insurance, there are three terms that have to do with age: age basis
, original age, and attained age. The names are rather straightforward, but you may find that the implementation of each concept can throw you for a loop. Let's learn how they're used
When you start a life insurance policy
After completing the life insurance application process, you may be dismayed to find that the price you are offered is different from the price you were quoted. The reason for this discrepancy lies in the factors that determine the cost of insurance. With regard to the person or people that you are trying to cover, the major factors are age and physical condition. It is quite understandable that the insurance company may think that the insured's physical condition merits a health class better or worse than the one you selected when you first requested a quote, but some shoppers may find it imponderable that the insurer should calculate the insured's age differently than they would do!
"Age basis" refers to the age that the insurer considers the insured to be. This is the age that is plugged into actuarial formul to calculate cost of insurance. With some insurance companies, age basis is equal to age (as the layman would reckon it). With others, though, age basis is based upon the insured's nearest birthday. That means that six months before his/her birthday, his/her age basis increments by one year.
If you find that your age basis differs from your age, don't worry. The insurer isn't picking on you. It has merely decided that all of its calculations are more accurate when an insured's nearest birthday is used. If you selected the appropriate rate class, your offer should still coincide with your quote (you don't need to enter a date six months before your birthday onto the quote form).
-During the life of your policy-
Generally speaking, it is the "original age"-the age basis of the insured at the time of the policy's inception-that determines a policy's cost of insurance (COI). With term life insurance and whole life insurance, this is a simple matter that requires no greater elucidation, but with universal life insurance, the COI actually increases yearly to reflect the insured's current age.
-At the conclusion of your policy-
Permanent life insurance is built to last for the remainder of the insured's life (though whole life tends to mature if the insured attains the age of 100), but term insurance policies generally expire before the insured's life, except in case of untimely death. Coverage does not need to end at that point, however; insurance companies usually allow the policyholder to convert his/her policy into a permanent policy, that is, the policyholder can choose from one or more permanent life insurance products to replace his/her coverage without going through the application process again.
The appeal of conversion is that the new policy's rate class will be the same as the old policy's rate class. There's no need for another medical exam, even if the insured's health has declined. The policies' face amounts will likewise be identical. So if you had a term policy for half a million dollars under Preferred rates before, your permanent policy will be for half a million dollars, under Preferred rates. However, your new policy's cost of insurance will not be base upon the original age of your old policy. The new policy's original age will be the insured's "attained age" (current age).
by: Mark Manderson
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