Should you backdate your life insurance policy?

It’s totally legal — and could save you money.

Logan Sachon

Logan Sachon

Published May 29, 2020

When you buy life insurance, there may come a time near the end of the process where your broker or agent will talk to you about backdating the policy.

If this happens, don't panic — your broker didn't just turn into a con artist. When it comes to life insurance, insurers will let you backdate a new policy a few days or even up to six months, and by doing so you can get a lower premium.

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Why life insurance companies allow backdating

It's a little unfortunate that the word "backdating" is used for this concept, because with some other insurance products backdating can be a very bad thing. Take auto insurance, for example: if you backdate your car insurance policy so that it says you were covered for an accident you had the month before you actually bought the policy, you'll be committing fraud. You do not want to backdate your auto insurance policy.

Life insurance is different because by making your policy retroactive by a short period, the insurer isn't taking on any more risk, they’re just collecting premiums on time that has already passed.


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When it makes sense to backdate your life insurance policy

With life insurance, your rates increase as you age. Your rates when you’re 40 are going to be higher than your rates when you’re 39.

But some insurers calculate age differently than we do. They use your half birthday, or your insurance birthday, to calculate your age — and your rates.

For example, the day you turn 39, you six months to apply for life insurance and get your 39-year-old rates. Once you reach your half birthday — that is, when you're 39 years and 6 months old — the insurance company considers you to be 40, and will set your rates accordingly.

Backdating is an opportunity to rewind the clock to before your half birthday, when the insurance company still considered you … the age that you are. It's complicated, but not that complicated.

Basically: If you apply for life insurance after your half birthday, you can backdate your policy so that its in force date was before your half birthday to take advanatage of lower rates.

(If you apply for life insurance before your half birthday, there's no need to backdate, since six months before your insurance company would have already considered to be your current age.)

Most insurance companies will let you backdate your policy up to six months.

How to decide if backdating is right for you

The downside of backdating your insurance policy is that it isn’t free. You'll have to pay the premium for those weeks or months that are now part of your newly backdated policy. When you're deciding whether it's worth it to backdate or not, there are three questions to consider:

  1. How much will you save on your premiums annually or monthly?
  2. How much additional premium will you have to pay upfront?
  3. How long will it take you to break even on the extra premium?

Generally, backdating your life insurance policy isn't as useful for younger applicants because the difference in premiums from year to year isn’t that much. As you get older, though, you'll see bigger jumps in your premiums with each birthday. But if you're over 40 and shopping for life insurance, backdating can be a handy — and completely aboveboard — way to save a little on your new insurance policy.

A Policygenius agent can answer any questions about backdating that you have.