Adverse Selection: Insurers experience and price for adverse selection when healthy, low-risk insureds requalify for different coverage at lower “select rates” in response to otherwise annually increasing premiums, whereas unhealthy, high-risk insureds cannot requalify for new coverage, and thus create a disproportionate increase in the likelihood the insurer will pay a claim to a member of a given pool of insureds, for which the insurer charges a disproportionately higher premium.
Age Last: Life insurance policy rates and premiums are dependent on the applicant/insured's age (i.e., a policy priced for a 40 year old will have different rates and premiums than the same policy priced for a 50 year old). However, different insurers calculate age differently. Certain insurers calculate age based on the applicant/insured's last birthday, and thus use their actual age for purposes of determining applicable rates and premiums (e.g., a person born June 11, 1962 who applied for a policy on January 1, 2012 would be offered 49-year-old rates/premiums).
Age Nearest: Life insurance policy rates and premiums are dependent on the applicant/insured's age (i.e., a policy priced for a 40 year old will have different rates and premiums than the same policy priced for a 50 year old). However, different insurers calculate age differently. Certain insurers calculate age based on the applicant/insured's nearest birthday, and thus use the age to which the applicant/insured is closest for purposes of determining applicable rates and premiums (e.g., a person born June 11, 1962 who applied for a policy on January 1, 2012 would be offered 50-year-old rates/premiums).