What Happens When a Life Insurance Policy is Backdated?

Team Marble
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October 4, 2022
What Happens When a Life Insurance Policy is Backdated?

What is Life Insurance Backdating?

Life insurance backdating is when an individual uses a previous date, rather than the effective date of their life insurance application, to change their insurance age. 

Fun (and maybe not-so-surprising) fact: Life insurance premiums increase as you age. Turns out that as you get older, you become riskier to insure. Aging, eh? It’s not for the faint of heart! So if you have a life insurance policy and are interested in saving some cash, backdating your age could help you save on insurance premiums. 

But is life insurance backdating illegal or is it legitimate? While it may sound a little iffy on its face, life insurance providers do allow you to backdate a new policy to your last half birthday. So while we all might wish we could turn the clock back to 21, we don’t recommend doing that with backdating (unless you’re actually 22); if you try to knock years off your age, you’ll end up coughing up a lot of cash to cover the time gap. 

What Happens When an Insurance Policy is Backdated?

The main thing to keep in mind when an insurance policy is backdated is that your true age and your life insurance age aren’t necessarily the same thing. Your insurance age is tied to your half birthday, which means that insurers don’t necessarily round up. Say you’re 47 and 9 months. Your policy may be backdated three months and one day so that you’re charged the premiums for a 47-year-old and not a 48-year-old. 

Eligibility for life insurance backdating is based on quite a few factors. In addition to your age, your insurance company may evaluate your health records, medical exams, lifestyle choices (like substance use), and more. All of this goes into determining the risks involved in covering your life. 

If the insurance company determines you do have higher risks, you’ll end up paying more regardless, since most insurance companies are very concerned about their clients’ risk factors when it comes to buying life or health insurance policies. Backdating, however, could help to lower your premiums slightly even if you’re a risky candidate.

The Pros and Cons of Backdating Your Life Insurance Policy

It sounds magical to turn the clock back six months on your policy, but backdating your life insurance has both positives and negatives, which you’ll want to consider carefully before jumping on the phone to contact your insurance agent.

Pros of Backdating Life Insurance

Lower your premium

Premiums increase when the risk to the insurance provider increases. To calculate that risk, insurers will look at age and health in particular - so it makes sense that lowering your age by a single year could potentially save you a significant amount of money. 

When insurance carriers have your policy backdated, they consider the nearest age to lower premiums on your life insurance plan. Sometimes, the nearest age will put you in a lower premium bracket

As an example: If you’re 33 years and 7 months at the time the policy is purchased, the agent could consider you to be a 34-year-old, which results in higher premiums. However, backdating the policy by two months would make you 33 years and 5 months, which in turn makes you eligible for the lower premiums associated with being 33. 

Make payments during high seasons (seasonal income)

Backdating life insurance could also be beneficial to individuals who do not have a steady income or whose income fluctuates throughout the year. If the policyholder buys life insurance during their off-season, the insurer could backdate the policy to the time of year with maximum earnings. 

Let’s use the farmer Old McDonald as an example. Old McDonald doesn’t have a consistent income all year round. He can decide to work with his insurer to backdate the policy to start during the harvest season, when his crop is cultivated and sold at the local farmer’s market. Opting to make payments during his busiest and most lucrative time of year could help him better afford the premium.

Help you remember your payment dates

During the insurance underwriting process, you can select to backdate your policy to coincide with an important date, like your birthday. This may help you remember the insurance premium due date and when to consider renewal. Moreover, backdating a life insurance policy could also reduce the length of the policy period, which leads to early maturity.

Cons of Backdating Life Insurance

Despite the benefits, backdating insurance has its disadvantages too. After all, there is no such thing as unmitigated good!

Not great when you have low income

When you backdate a policy, you’ll have to pay monthly premiums and the interest rates for the backdated period. Depending on your income and how much spare cash you have, this may not be ideal for your budget. 

Not great when you’re younger

Backdating may not be so great for individuals under the age of 25, because the insurance rates don’t tend to vary much in this age group. You’ll likely be paying the same rates regardless of whether you’re 20 or 21. But if you’re 21: go buy yourself a beer!

Not beneficial for term policies 

Backdating does not offer significant benefits for term life insurance. In fact, it can cost you more in the long run and you’ll waste the coverage during the backdated period. So if you’re buying a term policy, you probably want to stick to the most up-to-date time period.

Complete Timely Registration with Marble

Marble is an online insurance comparison tool that enables you to compare insurance products so that you can purchase the life insurance policy that best fits your needs. Whether you’re looking to buy life insurance, auto insurance, or any other type of policy, create your account today to find affordable quotes that could save your money.

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