You may not realize the impact of age on life insurance premiums until you’re in the process of purchasing one.
But the earlier in life you start your policy, the better. Those who wait until their late thirties or forties (or even later) to get a policy can end up paying much higher premiums than those who get a policy in their twenties.
In day-to-day life, half birthdays don’t seem to make much of a difference. However, with life insurance, it’s possible that getting a policy even three months earlier can save you a significant amount of money. Insurance companies call this backdating.
Reversing the date of a life insurance policy results in reduced premiums, but it requires you to pay more money upfront. When you backdate an insurance policy, you are changing the date on which your coverage became active to a date in the past.
If you are looking to backdate a policy, you may be wondering exactly how many months can a life insurance policy be backdated? Read on to find out…
How Many Months Can A Life Insurance Policy Be Backdated?
According to Finder, insurers may allow you to backdate your life insurance policy by up to six months if doing so will result in a lower premium payment for the coverage. But there’s more to it than that, you’ll want to be aware of.
Backdating is based on your insurance age, which is typically not your actual age but rather your nearest physical age — as determined by your half birthday — in most circumstances. Here are some of the most significant terminology and their implications when it comes to backdating your life insurance policy:
The term “actual age” refers to your current age. The nearest age is the age to which you are physically closest. Lastly, the Insurance age is the age at which you are categorized by the insurance company. Insurance companies usually use the nearest age.
Some life insurance companies use your birthday to establish your age when applying for a life insurance policy.
However, many life insurance companies utilize what is referred to as “your nearest age”. That implies your age is rounded up to the nearest birthday by six months.
If you apply for life insurance after your half birthday, you can backdate it to a date prior to your half birthday to lock in cheaper rates for the duration of the policy.
How Does Insurance Count Age?
Let’s consider a few examples to illustrate how insurance calculates your age.
Let’s say you’re turning 39 soon and looking to buy a life insurance policy. You have six months from the date you turn 39 to apply for life insurance to receive your 39-year-old rates. Once you are 39 years and six months, insurance considers you 40 years and six months and raises your rates.
If, on the other hand, you are 39 years and five months old, your age is determined to be 39. If you are 39 years and seven months old, your life insurance policy considers you to be 40 years old. So, your premiums will be that of 40 years old instead.
Life insurance companies let you backdate your policy because it poses no risk to the company. To them, it’s an opportunity to collect months’ worth of premiums prior to your enrollment. But they’re only losing a small fraction of your age-related discount during the policy’s duration.
