Should You Backdate Your Life Insurance Policy?
The cost of buying life insurance in your 50’s and 60’s is significantly more than buying life insurance in your 20’s and 30’s.
The cost of life insurance for someone in their 20’s and 30’s doesn’t change very much from year to year.
However, as you get older the cost of life insurance does go up significantly each year.
If you take a look at the table below you will see there is very little difference in cost for a 30 year old vs for a 35 year old man.
However, for a 50 year old vs a 55 year old there is quite a difference. And that difference becomes even more when you get into your 60’s and 70’s.
Understanding backdating is just one technique that can help you get the cheapest life insurance over age 50.
Let’s take a look at sample rates for a $500,000 20 year term life insurance policy for a man in great health.
$500,000 - 20 Year Level Term - Sample Rates For a Healthy Male
For someone under the age of 50 there is typically little need to consider backdating a life insurance policy.
The difference in premium for a 30 year old vs a 31 year old is very small.
However, if you are purchasing a life insurance policy after the age of 50 then backdating is something that you may want to consider doing.
The total savings over the course of the life insurance policy could be substantial.
What Does It Mean To Backdate Your Life Insurance Policy?
Ok, now this can be a little confusing for most people when learning this for the first time.
Don’t ask me why, but most life insurance companies go by what’s called nearest age,not your actual age.
This means that if you are within 6 months of your next birthday you would be considered one year older for purposes of life insurance.
For example, let’s say you are 60 years old today and your birthday is August 1st.
If you are looking to buy a life insurance policy in March for example, then then you would be considered to be age 61 for life insurance purposes.
Let’s say you have the option of either having a policy effective date of March 28 or you can backdate.
Most insurance companies will make you backdate for 6 months and 3 days which would make for a February 25th effective date.
If February 25th is chosen then you would owe about one month of back premium even though you were not insured during that time.
The Pros and Cons of Backdating
Let’s so you don’t backdate. And let’s assume your policy effective date will be March 28th.
For $500,000 of 20 year term a 61 year old man could pay $235.73 per month. (Based on sample rates above.)
However, If backdating is chosen then the policy date would be February 25th. You would be considered to be age 60 for life insurance, and the premium would be $205.97.
If today is March 28th then one month of back premium would be due plus one additional month to pay the policy through April 28th.
Backdating costs more up front but it can save you a lot of money in the long run.
Here’s the numbers…
The premium at “insurance age 61” is $235.73 per month. Over the course of 20 years the total cost out of pocket would be $56,575.20.
If the policy were backdated making him “insurance age 60” it would cost $205.97 per month. Over the course of 20 years the total cost out of pocket would be $49,432.80.
In this case backdating saved $7,142.40. That’s a big difference!
There are only two downsides to backdating in this example.
One is that one month of premium would have to be paid for a month that you weren’t insured.
The second is that the policy would end about one month and 3 days sooner. It would end just shy of 19 years and 11 months.
The upside of course is that you would save a lot of money by backdating.
Although most companies do go by nearest age, there are some companies that go by actual age.
This is why a good life insurance agent will always ask for your actual date of birth, not just your age.
Know that just because one company goes by actual age instead of nearest age it doesn’t mean that they will have the better rates.
Backdating is just one technique that should be considered when purchasing life insurance in your 50’s, 60’s, 70’s.
Often times backdating won’t even be an option. It will depend on when your date of birth is, and if you are seeking coverage with a nearest age company or a company that goes by actual age.
Knowing Your Options
It’s important that you understand your options before starting your life insurance policy
Also, know that if you are confused by this at all that you aren’t the only one….far from it!
If you have any questions on this please don’t hesitate to give me a call.
When trying to secure the best life insurance in your 50’s and older the decision on whether to backdate or not to backdate is just one of the things that needs to be considered.
Of course the first two steps are deciding…
- How much life insurance coverage you need.
- How long you need your life insurance to last for.
If you need help figuring this out I am here to help.
Once we know how much life insurance you need and for how long you need it for, the next step is is finding the best policy for you.
I am an independent agent and work with dozens of companies.
I can explain all your choicest to you so that you can make an informed decision.
Know that if you have health concerns and are concerned that your medical history that is less than perfect, chances are still high that I can help you secure affordable coverage.
If you would like to receive a quote fill out the form or you can simply call me a call.