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Backdating insurance is one way to save money on life insurance. If you take out a policy between two birthdays, the company might charge you a higher premium based on the birthday you're approaching, rather than your calendar age at the time. When this happens, you might be able to save by backdating the insurance to before your last birthday. The younger age your insurer uses might significantly reduce the monthly premium you pay for life insurance.

How Does Backdating Insurance Work?

Your insurance age is an important number. It is not always based on your actual age but on your nearest physical age. This is determined by your half birthday. Here is how your actual, nearest and insurance age differ: 

  • Actual age: This is your real age.
  • Nearest Age: This is the age you are physically closer to. For example, you turned 29 on December 1, and four months later on April 1, you applied for life insurance. Your nearest age is 29; however, if you applied for life insurance eight months later on August 1, you are closer to being 30 years of age.
  • Insurance Age: This is the age the insurer classifies you at, which is generally your nearest age. 

An applicant who buys life insurance after their half birthday can choose to backdate their policy so that it is in force before their half birthday. This lets them take advantage of lower premiums for the entire policy term. 

For example, you turn 29 years old on December 1. You have six months to apply for life insurance and get your 29-year-old rates. On your half birthday — the day you are 29 years and six months old — the insurer considers you to be 30 years old. If you are 29 years and eight months old, you may have the choice to pay premiums based on your insurance age (30 years old) or to backdate your policy to your actual age (29 years old). Life insurance companies may let applicants backdate new policies from a few days to six months.    

Is Backdating Insurance Right For You?

Younger applicants may not benefit from the backdating practice because premiums are typically lower, but as you get older and premiums increase, backdating might save policyholders a significant amount over 10 or 20 years. While backdating insurance may be the right decision, it is not free. Policyholders will have to pay the premiums for the weeks or months that are part of the backdated plan. Here are four questions to consider when deciding whether to backdate insurance or not: 

  • How much will you save on monthly or annual premiums by backdating a policy?
  • How much additional premium will backdating cost you upfront?
  • How long will it take your life insurance policy to break even on the extra premium?
  • Does backdating the policy affect the term length of the policy?

If your life insurance policy starts on the backdate and not on the day you physically sign your insurance contract, your term length may be shortened slightly. For example, you sign and pay for a 25-year term policy on August 1, 2021 but backdate your life insurance contract for May 1, 2021, instead. Your term length is based on the backdate. Your coverage will expire on May 1, 2046.

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