Life Insurance Policy Backdating

Life Insurance Policy Backdating

Life insurance policies are issued at the Insurance age of the insured. With age being one key factor in determining the premium rate of a policy, it is important to keep the age at policy issue as low as possible. In the absence of a viable time-traveling machine, there is little we can do to reverse the aging process. However, policy backdating is sometimes an option that could keep the Insurance Age of the insured down by one year. And one year often makes a big difference in premium rates.

For the most part, life insurance premiums increase as you get older. So having an 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 = $300.00 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 = $325.00 annually

The final premium is now $25.00 higher annually due to the age change. Over the course of a 20-year term policy, this would result in an additional cost of $500.00 to the policy owner.

• Example 2 - With Backdating

Original Quote = $300.00 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 = $300.000 annually

This policy was backdated with a policy date of July 15, 2006, which is one day prior to the applicant's age change. This resulted in keeping the issue age of the policy at 30 and the premium at the original quote of $300.00 annually.

Backdating this policy would result in a savings of $500.00 over the course of the next 20 years. However, in doing so, the policy owner must pay for coverage for a period of time 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 $25.00. There is obviously a positive tradeoff for the policy owner in this case. Backdating the policy to age 30 would result in a net savings of $475.00 over the term of the policy.

Depending on the circumstances, it may not always be best to backdate a policy. QuickQuote's Account Managers and Case Managers work closely together to identify backdating opportunities and present the associated advantages and disadvantages to applicants. Our objective is to help customers decide the best course of action to take for saving money on their life insurance policies.