Should you backdate your life insurance policy?

Backdating a life insurance policy gets you lower premiums, but requires additional premiums upfront. Here's how to make the most cost-effective choice.

Headshot of Policygenius editor Nupur GambhirAmanda Shih author photo

By

Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated|6 min read

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During the life insurance application process, your age is one of many things that insurers factor into how much you pay for your coverage. The older you are, the more you’ll pay. But after your half birthday, insurers consider you one year older because it’s the age you are physically the closest to.

If this happens to you, you’re not certain to pay higher premiums. You'll be offered an option to backdate your policy, i.e., pay premiums based on your current age, plus any additional months of premiums since your birthday.

But backdating isn’t right for everyone. If you’re a younger applicant, you may see such a small difference in price that you’re better off paying the higher premiums. For others, however, opting for the lower premiums can make a big difference over the life of the policy, even if you factor in paying for a few extra months.

Key takeaways

  • The age life insurance companies use to set your rates is called your insurance age.

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

  • You can only backdate as far as your last half birthday.

  • Backdating usually makes more sense the older you are since year-to-year price differences are larger as you age.

What is backdating?

Backdating an insurance policy is when you set the day your coverage became active to a date in the past. In other types of insurance, it's impossible (or fraud) to backdate your policy, but in life insurance, backdating your policy is an option insurers offer to save you money.

If you get an offer to backdate your policy, the insurer lists your policy’s effective date (the date that your life insurance policy became active), as a date in the past when you were so that you can lock in lower premiums. There is one caveat: You have to pay for all the months between your backdated policy date and the current month.

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How does backdating work?

Backdating revolves around your insurance age, which usually isn’t your actual age but your nearest physical age — determined by your half birthday.

Here's 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, usually your nearest age

If you apply for life insurance after your half birthday, you can backdate your policy so that its effective date is before your half birthday to get lower rates that will last for the entire policy term. 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're 39 years and six months old, the insurance company considers you to be 40 and sets your rates accordingly.

So if you are 39 years old and seven months, you’ll 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.

Why do life insurance companies care about your half birthday?

You may never think about your half birthday, but your life insurance underwriter does. Life insurance companies underwrite you based on the age you are closest to, which is why your half birthday matters during the underwriting process

Life insurers set your premiums based on how likely you are to pass away while your policy is active. Because life expectancy goes down as you get older, your premiums go up as you age.

Once you hit your half birthday, insurers set your premiums as if you are a year older. While not ideal — life insurance premiums increase as you age — you may be able to keep your policy affordable by backdating your policy to the day before your half birthday.

The age your insurer uses to set your rates is called your insurance age. Your insurance age depends on your nearest age (the age you’re closest to) instead of your actual age (your current age). 

How your half birthday affects your life insurance rates

Generally, the cost of life insurance increases about 4.5-9% every year that you age — and even more in your older years. But when you’re younger, the price discrepancies are smaller.

A 25-year-old who’s given an insurance age of 26 might see a difference of a few cents between the two premiums. A 55-year-old with an insurance age of 56, however, could pay almost $20 more every month. Over the life of a 20-year policy, that could be a $4,800 difference.

How far back 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 if you did, you'd end up paying hundreds or thousands of dollars to compensate for the time disparity. Life insurance companies let you backdate a new policy up until your last half birthday to get lower premiums, but no more.

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When it makes sense to backdate your life insurance policy

It makes sense to backdate your life insurance policy if your savings from backdating are greater than what you'd spend on paying some extra premiums upfront.

With life insurance, your rates increase as you age. Your rate is set when you sign the policy, and it won’t change during the term of the policy. But, as you age, the cost of purchasing life insurance increases.

When you’re younger, the savings might be so minimal that there isn’t much reason to backdate your life insurance. But as you age, that price 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.

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

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

Age

Sex

Monthly premium

25

Female

$34.41

Male

$45.08

26

Female

$34.15

Male

$44.82

35

Female

$43.09

Male

$52.31

36

Female

$44.25

Male

$53.67

45

Female

$86.54

Male

$114.07

46

Female

$91.00

Male

$120.52

55

Female

$207.65

Male

$289.00

56

Female

$225.11

Male

$319.39

Sample premiums are calculated for non-smokers with a Preferred health rating in a Preferred health classification, obtaining a 20-year, $1,000,000 term life insurance policy. Life insurance averages are based on a composite of policies offered by Policygenius from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 10/08/2021.

As noted above, if you’re younger, the pricing discrepancies are so minimal that it might not make sense to backdate your policy. If you’re a 35-year-old female and you’re offered premiums based on your nearest age being 36, backdating your policy only saves you $1.16 per month ($278.40 over a 20-year policy). But if you’re 55 and underwritten as if you’re 56, backdating your policy can save you $17.46 per month and $4,190.40 over the course of a 20-year term policy.

When do you pay the extra premiums for backdating?

How and when you pay for the months between your backdated policy date and your approval date depends on whether you pay your premiums monthly or annually. If you pay your premiums:

  • Monthly: You’ll pay your extra premiums when you pay for your first month of coverage. If your policy is backdated two months, you’ll pay three months of premiums for your first payment.

  • Annually: Your extra premiums are part of your next annual payment. You’ll be charged on your policy’s adjusted date instead of when you were approved. For a policy approved in June and backdated to April, you’ll be charged next April.

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 premiums 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.

Frequently asked questions

What happens when an insurance policy is backdated?

Backdating your life insurance policy gets you cheaper premiums based on your actual age rather than your nearest physical age or your insurance age. You’ll pay additional premiums upfront to account for the policy’s backdate.

How many months can a life insurance policy be backdated?

Most life insurance companies allow you to backdate your policy a maximum of six months or up to your last half birthday, whichever is the shortest amount of time.

Does backdating insurance affect the term length?

Your policy’s coverage start date will align with the backdate and not the date you physically sign your policy. For example, if you sign and activate a 20-year term policy on October 14, 2020, but your policy is backdated for August 1, 2020, your term length is based on the backdate and your coverage will expire on August 1, 2040.

Authors

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

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Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

Editor & Licensed Life Insurance Expert

Amanda Shih

Editor & Licensed Life Insurance Expert

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Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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