When applying for life insurance, your age is a key factor that will impact how much you will pay for your policy. However, not all life insurance companies assign age in the same way. Some will use your actual age while others will assign your age according to your nearest birthday. To pay the lowest premium, it’s important to understand which age you will be assigned and how your chosen company assigns age.
Actual Age vs. Nearest Age
Actual age simply refers to how old you are at the policy’s issue date. While this is the obvious and generally accepted way we refer to a person’s age, only a few life insurance companies actually assign age this way.
On the other hand, nearest age is the age that you are on your closest birthday, which could be your actual age but could also be one year older than you think of yourself. For example, if you are 29 and your next birthday is in five months, a life insurance company using nearest age would consider you to be 30. This method of assigning age is the way used by most life insurance companies when underwriting a life insurance application. Assigning age this way can also end up costing you more money than you originally anticipated.
Backdating Life Insurance Policies
However, one way applicants can get around being assigned an older age, and potentially save money on their life insurance premiums, is by backdating their policy. Backdating involves setting the effective date of the policy to a date in the past, which then results in a lower premium rate based on a younger age.
For example, if your apply for a life insurance policy on May 1, 2023, but as of April 29th you are closer to your 39th birthday than your 40th birthday, you could request to backdate your policy to April 28th 2023, which would make you a year younger for underwriting purposes and lock-in the lower corresponding premium. This could save you a significant amount of money over the course of the term or duration of your life insurance policy.
However, there are a couple of considerations to keep in mind when backdating a life insurance policy. First, when you backdate a policy, you will be required to pay premiums for the time that has already passed between the backdated effective date and the current date. Second, your policy’s term will end a few months earlier than originally anticipated since it will end according to the anniversary of the backdated effective date and not the actual date that you purchased your policy.
The Bottom Line
When shopping for life insurance, it’s important to understand how age is assigned by different insurance companies and how backdating a policy can potentially lower your premiums. While backdating can save you money, it’s also important to carefully consider the additional upfront cost and the shorter amount of time your life insurance policy will provide coverage before proceeding.
CEG Life Can Help You Find the Right Policy
Ultimately, working with a trusted and experienced life insurance agent can help you make an informed decision about whether or not to backdate your life insurance policy. At CEG Life Insurance Services we can help you find the right life insurance policy at the best price for your particular circumstances. Contact us today to learn more.