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Backdating in Life Insurance: Should You Avoid it?

Backdating insurance is changing or altering the date you bought the policy to an earlier one. Click here to know in detail, backdating life insurance advantages and when to avoid it.

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Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

As you traverse through life, you realize certain things that should have been done months or years ago. It could be a financial decision that would have benefited your life or a personal resolution. There may not be do-overs to change your personal mistakes but there certainly are for investment choices. If you are a policyholder, backdating your insurance policy could be a remedy to that delayed decision of buying life insurance. Let’s look at what backdating life insurance is, its advantages and the time you should avoid it.

What is Backdating in Insurance?

Backdating insurance is changing or altering the date you bought the policy to an earlier one. You could be changing the date for a less expensive premium or for some other type of benefit. Backdating life insurance depends on your insurer and won’t cost you much if you are altering the date by a month or changing it to a date before the month of September. For example, if you have bought a policy on 22 June but you find out that purchasing it a month ago would have resulted to give better premium rates then you can backdate it.

Advantages of Backdating Insurance Policy

There are several advantages of backdating your insurance policy, some of them are:

1. Low Premiums

Your age plays a big role in the premium cost and backdating can aid in minimizing it by decreasing your age slab. If you are the age of 28 years and will be turning 29 in three
months, the insurer will consider your age as 29. But if you had bought the policy 2 months ago, you would have been 28 years and 5 months, putting you in the age slab of 28.

2. Early Maturity of Policy

If you have bought life insurance in the year 2020 which will mature in 25 years, you can back date insurance policy for early maturity. By altering the year to 2019, the maturity time will decrease by a year. This is a lucrative option for you as a policyholder.

3. Quicker Money-Back Returns

Money-Back returns mature after every five years in the policy term. So if you buy a plan in 2019, your first money-back will be credited in the year 2024. But if you back date
insurance policy to 2018, you will receive the maturity amount in 2023, a year early than the actual date.

4. Policy Matures During Vital Periods

You may not have bought life insurance at the right time but you can back date it so that it matures during important periods of your life like your child’s college education or a future loan payment date. This eases the pressure and makes your financial situation smoother.

5. Edit the Payment Date

If you do not have a steady flow of income and have a seasonal cash inflow, backdating your life insurance policy helps in altering the payment date to ease up future payment dates.

When to Avoid Backdating Insurance Policy?

Even if the advantages of backdating are fruitful, there are certain instances when you should avoid going for this option. Here are some of them:

1. Term Insurance

In the case of term insurance, backdating your policy is not useful as the aim of buying term plan is to ensure you have a life cover for a fixed period. If you end up backdating it, you lose the life cover for that period of time.

2. Younger Age

Backdating for a less expensive premium may not hold good if you are between the age of 20-25 years. When you are younger, the premium prices do not fluctuate much but tend to increase as your age increases. Hence, using this option will not benefit you at a younger age.

3. Fewer Funds

If you backdate your policy, you have to pay all the premiums of the backdated period. And it does not come cheap and can cost you a lot as your insurer might charge a considerable amount apart from the premiums.

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- A Consumer Education Initiative series by Kotak Life