Should you backdate your life insurance policy?

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

Nupur Gambhir

Nupur Gambhir

Published July 8, 2020

KEY TAKEAWAYS

  • The age you are considered by life insurance companies is called your insurance age

  • Your insurance age is usually based on your nearest age, and not the age you actually are

  • If your insurance age is older than your actual age, you may be able to backdate your policy to receive lower premiums

  • Backdating your policy means you get premiums based on your actual age, but you have to pay additional premiums for the months that your insurance age and actual age don’t match up

During the life insurance application process, your age is one of many factors that insurers take into account to determine how much you pay for your coverage. The older you are, the more you’ll pay. But they won’t always underwrite you on your actual age — after your half birthday, they may consider you one year older because it’s the age you are the closest to.

If this happens to you, you’re not doomed to pay higher premiums for the rest of your policy’s term — this is where backdating comes into play. If your half birthday has passed and the insurer considers you older than you actually are, they’ll probably offer you the option to backdate your policy, or choose between different premiums: either pay premiums based on the age the insurance company considers you or pay premiums based on your real age, plus a few additional months of premiums that account for when the insurer considered you that age.

But backdating isn’t for everyone. Depending on your age, you may see so little of a difference in price that you’re better off paying the higher premiums. For others, however, opting in for the lower premiums — and paying for a few extra months — can make all the difference.

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What is backdating?

Backdating tends to have a negative connotation. 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.

But for life insurance, backdating isn’t a bad thing and can actually save you hundreds — or even thousands — of dollars. In the realm of life insurance, backdating can be a good thing 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.

So what does that mean, exactly? If you get an offer to backdate your policy, the insurer lists your policy’s effective date, or the date that your life insurance policy became active, as a date in the past so that you can lock in lower premiums because you were younger on that date. If it sounds too good to be true, there is one caveat to be aware of: you have to pay for all the months your policy was technically in force.

How does backdating work?

Backdating revolves around one key number: your insurance age, which usually isn’t based on your actual age but your nearest physical age — determined by your half birthday. Some insurance companies do honor your actual age as your insurance age, but for the most part, you can expect to be underwritten based on the age you’re physically the closest to.

Here is the breakdown of what those things mean:

  • Actual age - your real age
  • Nearest age - the age you are physically closest to
  • Insurance age - the age you are classified as by the insurance company, which is usually your nearest age

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 advantage of lower rates. For example, the day you turn 39, you have 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 six months old — the insurance company considers you to be 40, and will set your rates accordingly.

So if you are 39 years old and seven months, you’ll likely have to choose between paying premiums based on your insurance age (40) or backdating your policy to your actual age (39) and paying two months of extra premiums to account for receiving premiums based on the month before your half birthday.

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Why your half birthday matters

The life insurance application process involves a thorough evaluation of your health, hobbies, and of course, your age, to determine one thing: your risk of dying. Your mortality determines how much you pay for life insurance — the higher your risk of dying at an earlier age, the more you’ll pay.

Because after your half birthday, you are physically closer to your next age, insurance companies associate your mortality with that age too. The bottom line is that anything that might affect when a life insurance company projects you’ll die is going to affect the premiums you get.

How long can you backdate a life insurance policy?

You can’t just backdate your policy an infinite amount of time to get more affordable premiums — and you probably don’t want to, you could end up paying thousands of dollars to compensate for the time disparity. Life insurance companies will let you backdate a new policy a few days or up to six months.

Backdating essentially revolves around your half birthday. You are able to backdate up until your last half birthday to get lower premiums, but no more.

When it makes sense to backdate your life insurance policy

Backdating is an opportunity to rewind the clock back to your half birthday when the insurance company still considered you… the age that you are.

With life insurance, your rates increase as you age. When you’re younger, the rate change might be so minimal that you’ll barely see a difference — and there isn’t much reason to backdate your life insurance policy. But as you age, that pricing difference surges. Your rates when you’re 40 are going to be higher than your rates when you’re 39 and backdating your policy could save you a lot of money.

However, 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.

Take a look at the graph below to get a sense of how much your half birthday could affect your life insurance rates (depending on your age).

Average life insurance premiums for women:

AGE$1,000,000 IN COVERAGE
25$34.54
26$34.69
35$41.73
36$44.36
45$84.34
46$91.85
55$200.61
56$225.62

Average life insurance premiums for men:

AGE$1,000,000 IN COVERAGE
25$45.13
26$45.25
35$50.85
36$53.87
45$110.69
46$120.75
55$281.25
56$314.23

Methodology: Sample monthly premium rates based on 20-year term life insurance policy for a non-smoker in Preferred health rating; quotes based on policies offered by Policygenius in 2020.

You’ll notice that if you’re younger, the pricing discrepancies are so minimal that you might not need to backdate your policy. If you’re a 25-year-old female and you’re offered premiums based on your nearest age being 26, backdating your policy only saves you 15 cents per monthly premium. And over the course of a 20-year term, only $36. But if you’re 55 and underwritten as if you’re 56, backdating your policy can save you $32.98 per monthly premium, and $7,915.2 in the long run if you bought a 20-year term policy.

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. But as you get older and see bigger jumps in your premiums with each birthday, backdating might be the right choice.

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

About the author

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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