Final answer:
The most important factor to consider when deciding on converting term insurance at the insured's attained age or original age is the premium cost, which is influenced by mortality risks and the insured's health.
Step-by-step explanation:
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is premium cost. The decision primarily revolves around the cost of the premiums that will be paid going forward. Converting at the attained age usually means higher premiums because the insured is older and closer to the mortality risk, whereas converting at the original age may involve paying a sum of money upfront to account for the premiums that would have been paid between the original age and the attained age. Thus, health status and life expectancy will directly affect the premiums, making premium cost the most significant factor.
To illustrate, consider a scenario involving 50-year-old men with and without a family history of cancer. If an insurance company sells life insurance separately to each group, the actuarially fair premium is calculated by considering the group's unique mortality risk. The men with a family history of cancer have a higher risk of death within the next year (1 in 50) compared to those without a family history (1 in 200), which would result in different premium costs for each group if underwritten separately.