Backdating is a technique with your life insurance policy that resets your policy start date in order to preserve your age as one year younger — locking in your premiums for the policy duration at cheaper premiums.
How backdating works
Backdating is often effective (can save you premiums) if you've either recently had a birthday, or if you've just passed six months since your last birthday. Before we provide an example, it's important to understand that some companies use your actual birthday to calculate your age, while others use your 'closest birthday'. For those that use your closest birthday, you become a year older for calculating your insurance premiums six months after your birthday. So if you're 40 years old plus six months, then many life insurance companies will quote you premiums for age 41. Here's an example to illustrate. Let's say you were born May 1 and are now 40 years old. Then if you're looking at life insurance on November 30, your policy will be for a 41 year old. Your premiums for $1,000,000 of life insurance would be about $1050/year, as a 41 year old.
However if we backdate the life insurance policy — i.e. we start the policy on November 1st (even though it's November 30th) then your age for life insurance premium calculation would be $940 — a savings of over $100/year. By backdating the policy, you would be paying for life insurance starting on November 1st even though you don't get the policy until November 30 — you're paying about $90-$100 extra in the first year. But doing so reduces your premiums over the next 20 years by $100/year. By starting the policy a month earlier in this example and paying that extra month at the start, you save substantially for the next 20 years. This definitely a strategy that can save you substantially on your term life insurance premiums.
When to consider backdating
So, if your birthday is either just passed, or if you've just passed six months since your last birthday then we suggest you also run some quotes for a year younger to see if it makes sense for you to backdate. It's easy to tell if you should backdate if your birthday has just passed. For those trying to determine if your age change at your closest birthday makes sense, here's an easy to follow chart:
| If your birthday is: | Consider backdating if the current month is close to: |
|---|---|
| January | June |
| February | July |
| March | August |
| April | September |
| May | October |
| June | November |
| July | December |
| August | January |
| September | February |
| October | March |
| November | April |
| December | May |
You are welcome to call us at (416) 642-6820 and we can step you through the quotes and determine if backdating is a money-saving strategy for your term life insurance.