Q

Why do life insurance companies care about your half birthday?

A

Life insurance rates go up with age. A half birthday means your rates could be based on your nearest age instead of your actual age.

Nupur GambhirAmanda Shih author photo

By

Nupur Gambhir

Nupur Gambhir

Life Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius and licensed Life, Health, and Disability agent in New York.

&

Amanda Shih

Amanda Shih

Editor & Licensed Insurance Expert

Amanda Shih is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Her work has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated August 26, 2021|3 min read

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You may never think about your half birthday, but your life insurance underwriter will. Life insurance companies use your half birthday to determine the age you are closest to during the underwriting process

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 coverage to the day before your half birthday.

Key Takeaways

  • Insurers usually offer policies based on your insurance age, which is the age you are closer to turning

  • Backdating your life insurance policy allows you to pay rates based on your actual age, but you’ll need to pay additional premiums

  • The price difference between rates for your nearest and actual age increases with age

  • Calculate how much you’d save before agreeing to backdate your policy — it’s not always worth it for younger shoppers

Why do insurers care about your half birthday?

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. When you hit your half birthday, insurers evaluate you as if you’ve already aged one year. 

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). 

Here’s a quick guide to finding your insurance age:

Why your half birthday matters for life insurance

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How does your half birthday affect 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 around $20 more every month. Over the life of a 20-year policy, that’s a $4,800 difference. 

Can you avoid paying premiums based on your half birthday?

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 an option to backdate 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. 

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 when your policy is approved.

  • 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.

Should you backdate your life insurance policy?

Whether you should backdate your policy depends on which option saves you the most money. If backdating your policy would cost more than the amount you’d save or the upfront costs are out of your budget, accept the premiums based on your insurance age. 

Here’s how much backdating would save you over the life of a 20-year term life insurance policy.

AgeSexTotal savings
25Female$50.40
Male$55.20
35Female$352.80
Male$415.20
45Female$993.60
Male$1,428.00
55Female$3,072.00
Male$4,428.00

Methodology: Rates are for male and female non-smokers living in Ohio with a Preferred health rating and buying a $500,000, 20-year term life insurance policy. 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 8/26/2021.

It doesn’t always make financial sense for you to backdate your policy. If you’re in your 20s, the savings are small enough that you might actually spend more by backdating. But as you get older, the financial benefit shifts. 

If the price disparity is high enough, backdating your policy could be your most cost-effective choice. A licensed insurance agent can help you weigh your options.

Frequently asked questions

What is your insurance age in life insurance?

Your insurance age is the age insurers use to set your rates. It’s usually the age you’re closest to.

How does your half birthday change your life insurance policy?

Your insurance age goes up by one year once you pass your half birthday, which can lead to higher rates.

How much money can you save by backdating your life insurance?

It depends on your health and age. You’ll generally save very little by backdating in your 20s and early 30s but significantly more as you get older.

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