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.
Is backdated life insurance legal?
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.
Get free life insurance quotes today
Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
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
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
Yes, but your calculations for how much you’ll save becomes even more important. If your policy covers a ten-year term and, using the above example, you’ll only save $5 per month by backdating, it may not be worth it.
No. Once a life insurance product is discontinued, it is no longer available, regardless of the company’s backdating guidelines. If you see an opportunity to save, take advantage of it while it’s still on offer.
Six months is typically the standard, but the amount you are allowed to backdate your policy can also be determined by state law. For example, Ohio only allows you to backdate a life insurance policy by three months.
Heather Petty is a personal finance writer at Finder specializing in home loans, banking and insurance. After falling victim to a disreputable mortgage broker when buying her first home, she’s on a mission to help readers avoid similar experiences when managing their own finances. A self-proclaimed word nerd, her writing has been featured on MSN, Credit.com and MediaFeed.org, among others. Heather previously worked as a technical writer and editor for the casino systems industry and is an internationally published young adult mystery author. She holds a bachelor’s degree in English with a minor in journalism from the University of Nevada, Reno.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.