Final answer:
The answer that is NOT true when premiums are calculated based on the attained age of the life insured at the policy's issuance is that 'Premiums remain constant throughout the policy term.' While the premium is set at the beginning based on age, it is not adjusted for age thereafter in many policy structures.
Step-by-step explanation:
When premiums are calculated based on the attained age of the life insured at the time the policy is issued, the statement that is NOT true is C. Premiums remain constant throughout the policy term. Typically, when premiums are set at the time the policy is issued, they are determined based on the age of the life insured at that time. As the person ages, the risk of mortality increases, and thus premiums would naturally increase with the age of the insured if they were recalculated. However, for many policies, once the premium is set, it remains constant throughout the term of the policy despite the increasing age of the insured.
For instance, consider actuarially fair premiums, which are premiums set to reflect the expected risk. If a life insurance company were selling policies to 50-year-old men with and without a family history of cancer, the premiums would differ. The men with a family history of cancer, having a higher chance of dying within a year, would have a higher actuarially fair premium compared to those without. If the life insurance was sold to the entire group without differentiating the risk, the premium would be averaged across all members, potentially leading to adverse selection, where high-risk individuals are more likely to buy insurance, possibly making it unsustainable for the insurer.