One of the biggest rating factors for life insurance is your age. Most people probably don’t realize they can turn back time and be rated a year younger. Before people get too excited, I want to caution there are some restrictions and reasons for not doing this.
- Every insurance company has its own rules for backdating. Some allow a full 6 months, others allow a much shorter time, and some don’t allow any backdating. Backdating a policy several months might not be ideal for many clients because an agent has to collect all backdated premiums up front.
- Backdating might not be advantageous for young people. The difference in premium between someone who is 20 years old and someone who is 21 years old is negligible. On the other hand, the difference in premium between someone who is 79 and someone who is 80 is substantial.
- Backdating is only for people who are fairly certain they will keep a policy for life. I would not recommend it for someone with a history of life insurance cancelling because of nonpayment. If you end up keeping a policy for only a few months, then backdating is a waste of money.
- You must deal with an agent’s willingness to backdate. The issue of backdating rarely comes up for agents, so they might be out of practice and uncomfortable with the idea. Agents are a little paranoid about making mistakes, and agents know they are more likely to make mistakes with uncommon issues.