As most people know, your age has a lot to do with how much you pay for life insurance. But you CAN use your age to your advantage in getting a better rate. To find out more, read on.
For purposes of pricing their policies, term life insurance companies use one of two methods for calculating an Insured’s age. “Actual Age” is the terminology used by most laypersons to describe their own age — e.g. they are 36 until the day of their 37th birthday, at which time they are 37. “Attained Age” or “Age Nearest” is terminology used by the majority of life insurance companies in North America. These two terms mean the age you’re closer to. Once you are past your half birthday, they consider you to be the age you will be on your next birthday.
Depending on the insurance company, policies are based upon either your “age last” or “age nearest.” The “policy date” (the date coverage officially begins) is the date which will determine your age, based upon one of the two methods.
If we don’t specify otherwise, the insurance company will generally issue the policy at the rate corresponding to whatever your nearest or actual age is on the policy start date.
It can take many weeks to complete the process and we need to anticipate what will happen for two important reasons. We need to give you the best advice regarding the selection of a policy date so that you don’t end up paying more than you have to for your coverage. We also need to inform the insurance company regarding what our expectations are with respect to the issue date so that was can avoid unexpected price variations due to age changes which happen during the underwriting process.
It’s perfectly OK and legal to back-date the “policy date” up to six months, in order to save your age and save you money. While we won’t do this unless it saves you money in the long run, understand that when we back-date to save age, your first policy year won’t be a full year, even though you’re paying for a full year. In exchange, you get to pay the rate of a person one year younger for the balance of the years you’ll own the policy. We’ll crunch the numbers both ways, and make a meaningful recommendation one way or the other. The choice, however, is always yours. Backdating is never mandatory, just smart in certain situations.