What is Life Insurance Policy Backdating?

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Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites. You can find him on Twitter.

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UPDATED: Jul 31, 2020

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Life insurance policies are issued at your life insurance age. Since age is one key factor in determining how much you will pay for your policy, it’s important to keep your age as low as possible when your policy is issued (calculate your life insurance age here). If the timing works out, we can sometimes backdate your policy and keep your life insurance age of the insured down by one year. And that one year can make a big difference in the cost of your policy.

For the most part, life insurance premiums increase as you get older.  So having a life insurance age change during underwriting is most likely going to result in a higher final premium when the policy is issued.  To prevent this change in premium, a policy may be backdated to save the previous age of the applicant.  Here’s how it works:

  • Example 1 – Without Backdating 

Original Quote = $300 annually

 Action  Date  Age
 Application signed and dated  July 1 30
 Applicant’s age changes  July 15 31
 Application approved as applied  July 30 31
 Policy issued  July 31 31
 Premium submitted/policy in force  August 15

Final Premium = $325 annually

The final premium is now $25 more due to the age change. Over the course of a 20-year term policy, this adds and extra $500 to the cost. 

  •  Example 2 – With Backdating 

Original Quote = $300 annually

 Action  Date  Age
 Application signed and dated  July 1  30
 Applicant’s age changes  July 16  31
 Application approved as applied  July 30  31
 Policy backdated and issued  July 31  30
 Premium submitted/policy in force  August 15

Final Premium = $300 annually 

This policy was backdated with a policy date of July 15, which is one day before the applicant’s age change.  This resulted in keeping the life insurance age at policy issue at 30, and the cost of the policy the same as the original quote of $300.

Backdating this policy would result in a savings of $500 over the next 20 years.  However, in doing so, the policy owner must pay for coverage for a period in which there was no coverage in place (July 15 to August 15). This is the opportunity cost of backdating, and in this case, the amount is equal to approximately $25. It’s clear there’s a real advantage to backdating this policy. Doing so will result in a net savings of $475 over the term of the policy.

Depending on the circumstances, it may not always be best to backdate a policy. Our Case Managers work closely with life insurance companies identify backdating opportunities. Our objective is to help you decide the best course of action to take for saving money on your life insurance policy.

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