There are several strategies you may use to try to secure a lower premium on your life insurance policy, including backdating, which means setting the policy's effective date to a time earlier than the actual application date. This changes your “insurance age,” which may help you lock in a premium based on a younger age or better health status.
However, backdating a life insurance policy is subject to certain rules and limitations, and it's essential to understand the implications and regulations associated with this practice. In this article, we’ll help you understand how backdating a life insurance policy works and the limitations of this strategy to determine if it’s a beneficial option for you.
What does it mean to backdate your policy, and how does it work?
When backdating a life insurance policy, the policyholder and the insurance company agree to adjust the policy's effective date to a prior date, typically within a specified timeframe from the completion of the application. The purpose of backdating is to lock in lower premium rates by essentially "aging” the policyholder to a younger age, which can result in more affordable premiums over the life of the policy.
For example, if an individual is 59 and eight months old, an insurance company may list their age as 60, meaning they’d receive a premium based on this age. However, if they decide to backdate their policy by a few months, they may then qualify for rates as someone who is 59 rather than 60. It’s important to note that backdating a life insurance policy is subject to regulatory oversight, and the practice must comply with the insurer's guidelines and state regulations.
How many months can you backdate a life insurance policy?
Most insurance companies allow you to backdate your policy a maximum of six months or up to your last half birthday, depending on which is the shortest amount of time. However, it's important to note that the specific backdating allowances may vary among insurance providers, so you’ll want to check with your insurance company to understand the maximum backdating period permitted under their policy.
What are the regulations and limitations of backdating your policy?
Insurance regulators often require that the request for backdating be made within a specific timeframe, typically six months to a year from the intended effective date. By backdating a life insurance policy, the policyholder may benefit from lower premiums over the life of the plan, potentially resulting in significant cost savings. However, backdating may also require the policyholder to pay additional premiums for the period covered by the backdated effective date, which can impact the upfront cost of the policy.
Insurance companies may impose limitations on the maximum allowable backdating period, and some insurers may not permit backdating at all. This is why it’s essential to be transparent and truthful throughout the insurance application and underwriting process, including disclosing any intentions to backdate a policy.
Shop for a Policy Within Your Budget with the Help of SelectQuote
When you’re looking for ways to save on your life insurance premium, you may consider strategies like backdating. Another way to be budget-conscious is to explore all of your options and review rates across carriers to find the option that’s right for you. At SelectQuote, our licensed insurance agents can compare rates from several of the nation’s most trusted insurance companies in just minutes, saving you time and guesswork while shopping for coverage.
