Backdating life insurance
In a situation where the same person applies for a policy and will be having a birthday shortly after doing so, the insurance company may consider him or her to be one year older when calculating rates.
In effect, he or she is paying for a couple of weeks worth of premiums and getting no benefit whatsoever.If you’re in your 30’s life insurance backdating is not an issue that you probably need to know about or even consider simply because, at your age, the cost of insurance doesn’t change much, if any, from year to year as you get older.Not so when you’re talking about vintage over 50 life insurance and even more so when it’s over 60 or 70 life insurance.Backdated life insurance premiums are sometimes used to lower premiums on a policy.Since an applicant's age is one of the factors used to calculate costs, it can help a person save on the cost of his or her coverage.Some insurance companies issue a policy based on the applicant's actual age.
The price is calculated based on the individual's age on the date the policy was issued. Another way of calculating age for insurance purposes is to use the applicant's nearest birthday.
The insurer will also factor in the investment income that can be earned on the premium.
Some liability claims may take a long period of time to settle, which will allow the insurer a longer time period to earn investment income.
When shopping around for life insurance coverage, a consumer should ask her agent whether a company offers backdated life insurance premiums to its policyholders.
The savings in premiums over the life of the policy need to be calculated before deciding to buy a policy with premiums calculated in this manner.
It is possible for them to use backdated life insurance premiums, as well, and this method of calculating age helps the policyholder save money on the cost of his or her coverage.