Life insurance companies use many factors when determining your rates for a policy, including your driving record, health history, and age. The latter is one of the main determinants of your rate: the younger and healthier you are, the cheaper life insurance will be, so some people choose to backdate their policies to lower their life insurance rates. Backdating can be used to lower your age on your policy, which will qualify you for reduced premiums on your policy. But how does it all work? And can it be used against you?
What Is Backdating?
While it might seem that determining your age for a life insurance policy should be very straightforward, it can actually get a little complicated. Some life insurance companies will use your actual age when you apply for the policy, while others will use your age at your next nearest birthday or half birthday. This means that, for example, if you were to turn 40 on March 4, you would be considered 40 on a policy application only until September 4 ( 6 months after turning 40). If you applied for a life insurance policy after September 4, you would be considered 41 years old to the life insurance company, since that company sets their rates according to your age at your next nearest birthday.
But some insurers allow you the option to backdate your policy. This means that you request the life insurance company assign your policy date to your last birthday, even if it has passed. For example, if you turned 40 in March and it is now November, you will technically be considered 41 to the life insurance company. But, you can request that the insurer backdate your policy to your birthday in March.
Disadvantages Of Backdating
You can only backdate your policy to your last half birthday, and no further than that. It might help to lower your premiums, but you should know that there is a disadvantage to backdating your life insurance policy. If you choose to backdate your policy, your premium payments will be due from the policy date, which means you will have to pay for any additional months from that 6-month mark, even though you were not technically insured at that point.
To return to our previous example: it’s now December, meaning you’re past your six-month half birthday period (September 4), and you decide you want to backdate your policy to your 40th birthday in March. You will get the 40-year-old rate instead of the 41-year-old rate, but will have to pay 4 months of extra premiums.
Should You Backdate?
Although you will have to pay for a few extra months if you want to backdate your life insurance policy, you could end up saving hundreds of dollars in premiums over the years. It makes the most sense for people who are older to backdate their policies, because the older you are, the higher your life insurance premiums will be.
If you are considering backdating, it would be wise to compare policies from different companies and work with an agent who can help you. They will be able to calculate the costs, and determine how much you will save on your premiums monthly or annually if you decide to backdate. They can also determine how much you will need to pay upfront.
To find the right policy for you, consider using online tools, or speaking with an agent. We have provided the top life insurance companies in the nation that offer hassle-free assistance and the most competitive rates below. Always check multiple sites to make sure you have bargaining power and know the different advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.