Is it worth it to back date your life insurance policy?

Often times when a quote is received by a client it shows that the age quoted is one year older than the person’s actual age. This is because insurance companies use your nearest age rather than your actual age to calculate premiums. That means that if your birthday is within the next 6 months, in the eyes of insurance companies you are a year older.

Being one year older most definitely affects your premiums, but the good news is that you may have an option to back date the policy to avoid paying more than you need. This often comes in useful when someone purchases a life insurance policy and the underwriting process takes a longer time than expected due to varying circumstances, for example, an attending physician’s statement being delayed.

The procedure to backdate is relatively simple, if you choose to do so you may elect to backdate up to six month prior to the issue date but your premiums for those months that you missed will have to be paid for.

Is it worth it?

To determine if it is worth the money that you have to shelve up really depends on you, the applicant. It will depend on firstly your cash flow, can you afford the lump sum payment? Also you will need to look at the difference in premiums and what the breakeven point is, and how much you will be saving over the life of the policy.

With policies that have higher premiums and those that are older, often times may be worth it to do so as you will be saving a fairly significant amount over the long term.

Here is an example of a 50 year and 51 year old male;

• Age 50 – 20 year term for $1million policy from Industrial Alliance – $3,050 per year
• Age 51 – 50 year term for $1million policy from Industrial Alliance – $3,790 per year

That’s an extra $740 a year. so that mean in as little as two and half years it becomes worth it to back date the policy in this case. And you if you add up $740 over many years you will be saving a bundle.