The penalty build up the more days you miss - 1 day for the first, 2 days for the second etc so if you were away for a week you would lose 28 days attendance, which is why insurance could still be useful. If you already have, say 250 days, the penalties won't take you below 200; if you have 489, penalties could take you down to 400, and so on.
Attendance rewards include Ace of Diamonds tokens, which you can exchange for IC...