5.5.2 Backdating
Not all insurers allow backdating, but it is an important concept to understand as the situation may be beneficial for a client someday - not to mention the fact that there may be questions on this subject in your exam. Since the cost of premiums is largely predicated on the insured's age at the time the policy is written, in order to provide the applicant with a lower premium rate, the insured's age as stated in the policy can be backdated in order to save age (usually up to six months). However, the insured must pay the backdated premium payments, and the policy's anniversary date will also be as it would have been if the policy had been purchased using the new effective date as well.
John turned 50 on August 1, and in December he purchased a life insurance policy. The premiums charged for a 49 year old are $50 a month less than for a 50-year old. His insurer backdates the effective date of the policy to July and charges him the lesser amount. The upside is that John has locked in the lower premiums.
The downside is that he must pay all back-due premiums and the anniversary date of the policy is already coming up in the next 6 months (July) rather than the typical year.
