You may never think about your half birthday, but your life insurance underwriter does. Life insurance companies underwrite you based on the age you’re closest to, which is why your half birthday matters during the underwriting process.
Once you hit your half birthday, insurers set your premiums as if you’re 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.
Learn more about how the life insurance underwriting process works
Life insurance terms you should know
Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.
Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.
Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.
Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.
Insured: The person who is covered by the insurance policy.
Policy: The legal document that includes the terms and conditions of your life insurance contract.
Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.
Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.
Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.
Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.
Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.
Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.
Why is your half birthday important for life insurance?
Life insurance companies 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.
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).
So, when you hit your half birthday, insurers evaluate you as if you’ve already aged one year.
Here’s a quick guide to finding your insurance age:
How does your half birthday affect your life insurance rates?
Generally, the cost of life insurance increases about 4.5% to 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 term life insurance policy, that could be a $4,800 difference.
How can you avoid paying higher premiums?
If your half birthday happens while your life insurance application is in progress, you won’t necessarily have to pay higher premiums — many life insurance companies offer the option of backdating your policy.
Backdating gives you the choice to get premiums based on your actual age. Your insurer marks the day before your half birthday as the date your coverage becomes active; in exchange, you pay premiums for the months between that date and the date your policy is actually approved.
For example, if your policy is approved in June, but your half birthday was in April, you’ll owe two additional months of premiums on top of your first premium payment. Insurers sometimes call this paying based on your save age, i.e., your actual age instead of your nearest age.
