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How does backdated life insurance work?

Take advantage of age-based discounts with this surprisingly legal practice.

You may not realize how important your age is to the cost of your life insurance premiums until you’re buying a policy. You may find that signing up three months prior would have saved you considerably. Thankfully, your insurer probably offers backdated insurance — a chance to go back in time up to six months and get the best premium available to you.

But backdating your policy isn’t free, and you’ll need to do some quick calculations to make sure what you’ll save is worth more than the cost to backdate.

What is backdated life insurance?

Insurers may let you backdate your life insurance policy up to six months if doing so will give you a lower premium.

For example, if you purchase life insurance before age 40, your premiums are less than after you turn 40. So, for the lower premium, you may choose to “backdate” by paying for the months between when you actually sign up and when you were 39.

Yes, backdating a life insurance policy is perfectly legal as long as the person you’re creating the policy for is still alive. Insurance exists so that you have coverage in place in case anything happens. Legally, you must have an already established policy before an incident for it to be covered.

Why do insurance companies allow backdating?

There’s no risk to the company if you backdate your policy. Unlike with home insurance, where backdating could mean that it would have to cover damage that happened within the backdated months, with life insurance, there’s no risk of having to pay out on a claim for that time. Instead, it’s an opportunity to collect months of premiums from before you signed up, while only losing a small percentage in your age-related discount over the life of the policy.

Actual age vs. nearest age

To calculate your age for a life insurance policy, some insurance companies use your birthday to determine your age, which is your actual age.

But many companies use what’s called your nearest age. That means your age is rounded up to the nearest birthday by six months.

So, if you are 39 and five months, your age is calculated to be 39. But if you are 39 and seven months, your age is 40 for your insurance policy.

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When you might need backdated life insurance

The most important factor in deciding if a backdated policy is right for you is how much you’ll save. For example, John is 39 years and nine months old and holds a rate at $115 for his monthly life insurance premium.

If he signed up three months prior, he could have paid a monthly premium of $100. In order to get the discount, he would need to pay three months in premiums to backdate his policy.

In this example, he’s paying $300 to save $15 per month, which may seem like a lot. But he’ll break even in 20 months. And, if he lives to be 80, he’ll have saved $7,200 on his life insurance premiums over his lifetime.

But if his savings would only be $5 per month, he may want to reconsider. In that scenario, it would take him five years just to make up the difference, and paying $300 up front to save $2,400 over the span of 40 years, may not seem worth it.

Get a backdated life insurance policy

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Policygenius - Life Insurance
18 - 85 years old
10, 15, 20, 25, 30 years
Depends on provider and policy
Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
20 - 60 years old
10, 15, 20, 25 or 30 years
No, for coverage up to $3M
Apply for term life insurance online without the medical exam. Get an instant decision and adjust your coverage at no charge.
18 - 60 years old
5, 10, 15, 20, 25 and 30 years
Compare 40+ insurers and apply online to get the lowest possible price — no medical exam required.
Everyday Life
18 - 70
10, 15, 20, 25, 30, 35 and 40 years.
Ladder multiple life insurance policies to save on the coverage you need for all your debts.
18 - 60 years old
10, 15, 20, 25, 30 years
Get a quote and apply.
21 - 60 years old
10, 15, 20, 25 or 30 years
Depends on policy
No-exam term policies up to $1 million online, with the option to upgrade to permanent life insurance later.

Compare up to 4 providers

Bottom line

Backdating your policy can be a great way to avoid the industry’s practice of using your nearest age to set your premiums. But whether you save money depends on how much you have to pay to backdate your policy and what your age-based discount will be. To make sure you’re getting the best deal, shop around and compare your other insurance options.

Frequently asked questions about backdated life insurance

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