So if you were born on December 7, 1952, your attained age in the summer of 2022 would be 69 years. But on your actual birthday during the same year, your attained age would be 70. Some insurance companies use your attained age to price insurance policies. For instance, it’s one of three rating methods used to determine rates for Medicare supplemental insurance or Medigap.
How Attained Age Works
When an insurance company uses the attained-age rating method to price a policy, it initially bases your rates on how old you are when you buy the policy. For example, suppose you’re 65 years old when you purchase a Medicare supplemental policy or Medigap coverage. In that case, your initial rates may be lower than if you were to wait until 66 to buy the same policy. When you turn 66, your insurance company may reevaluate your rates and increase them because you’re one year older. This process may continue each year as you age, with your rates gradually increasing. For example, if you’re 65 years old when you purchase a policy, and the insurer has an age band between 65 and 70, your rates may stay the same until you turn 71. They then may increase because you’ll be in a new age group. Attained age is one of many rating factors insurance companies consider. They also take into account your health, lifestyle, and coverage needs. Not all states allow insurers to use your attained age to price policies for Medigap coverage. For example, eight states require the community rating method: Arkansas, Connecticut, Massachusetts, Maine, Minnesota, New York, Vermont, and Washington. With community ratings, everyone in the same community pays the same monthly premium for the same policy. If you’re in one of these states, your Medigap policy won’t go up simply because you turn another year older.
Example of How Attained Age Is Used
Here’s an example to help you better understand how attained-age pricing works if you’re in a state that allows it. Say you are 65 years old when you are shopping for a Medigap policy, and you choose one with a $120 premium. On your next birthday, the insurance company reevaluates the rates and increases them to $126. Each year, your rates continue to go up. By the time you are 67, you pay $132 a month. Once you’re 72, your rates are even higher, at $165 per month. Monthly rates can get even higher if you’re older when you purchase the policy. For example, say you first purchased a Medigap policy at the age of 72. You pick the same plan, but since you’re older, your initial rate is higher—$165 a month. On your next birthday, you turn 73. As a result, your premiums increase to $171 each month. The following year, when you’re 74, your rates go up to $177 a month.
Alternatives to Attained Age
Not every insurer uses attained age to calculate rates. Two other methods used for Medigap policies are issue age and community rated. With the issue-age method, your rates are based on your age when you first buy the policy and don’t increase as you get older. So if you’re 65 when you purchase a policy, your rates stay the same even if you’re 85 years old at renewal.
What It Means for You
If you select an insurance policy that uses the attained-age rating method, you may initially pay less than if you had chosen one with a different rating method. Often, these policies are cheaper in the beginning compared to community-rated or issue-age plans. But as you age, your rates increase a bit each year. Eventually, you may end up paying the same or more per month than you would with a different type of plan. Paying your premiums with these rate increases could become problematic if you’re on a fixed income. When shopping for an insurance policy, compare pricing methods. That way, you can select the one that will save you the most money in the long run. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
