It is, of course, very possible to turn the hands of time in insurance cases, but then, what happens when an insurance policy is backdated? We will find out in this guide, so tag along.
What happens when an insurance policy is backdated? This simply means the date of coverage will be effective from earlier.
It can more realistically lower premiums, especially for life insurance, because insurers make charges based on a younger age or a cleaner driving record.
You do have to pay premiums, though, for the gap between the backdated effective date and the date you actually bought it.
What it Entails
By backdating, you essentially “age” the policy younger, which results in lower premiums for life insurance. For example, if you are 33 years and 7 months old and would otherwise be a 34-year-old, backdating for a few months would put you into the premium rate for 33-year-olds.
The largest drawback is that you’ll be paying the premiums for the time frame that you’re backdating. This could be up to six months of premiums upfront, depending on the policy and how much you’re dating it back.
Backdating is not always available or allowed with every type of insurance. It’s most commonly used with life insurance, and even then, there might be limitations.
It may also be used to avail lower premiums or improved rates in other types of insurance, like automobile insurance, if you can backdate to a period with a cleaner driving history.
Backdating also influences the policy maturity date and the date of money-back returns, even accelerating them.
What is Backdated Insurance?
This refers to starting the life insurance policy coverage from an earlier date. Backdating is totally legal and will not get the policyholder into any type of trouble. But there are a couple of things one should know before one buys a backdated policy.
Backdating of life insurance policies is generally an option, so the policy effective date can be written earlier than the application date, but only so far.
Most insurance companies have limits on backdating: you can backdate by six months or your last half-birthday, whichever comes first.
This might be a good thing because it may make it feasible for you to use a younger age with the policy, and you may pay less for your premiums.
Reason for Backdating
The purpose of backdating is to give the policyholder a younger age of insurance. There’s also:
1. Usual Backdating Period
The usual period of backdating is six months.
2. Other Backdating
Some insurers allow backdating up to your last half-birthday.
3. Impact on Term Duration
Where a policy is backdated, the term duration will be slightly shorter since cover starts on the backdate rather than the date of application.
Where a policy is backdated, premiums covering the gap between the backdate and the date of application must be paid, either in one amount or as part of the next premium payment.
Backdating can lead to early maturity advantages, especially with endowment policies. Also, ULIP schemes don’t offer backdating as a standard.
It is also worth noting that this is lawful and ethical in most instances, but double-check with your specific insurance company about their guidelines and limitations.
What’s involved when a life insurance policy has been backdated? Having a life policy backdated will involve backpaying your premium as if your coverage had started on the date the policy is backdated to. Therefore, it’s not always worth it to have a policy backdated.
Is Backdating Insurance Illegal?
Backdating insurance policies in general, especially for home and automobile policies, is illegal and fraudulent. Exceptions exist for backdating life insurance policies, however, with some limitations.
Backdating in such policies is not generally permitted and is fraudulent. Backdating can be seen as an attempt to secure coverage for losses already incurred, which contravenes the terms of the policy contract.
Some insurance companies for life cover would allow backdating, and in some cases, there is a limit on how long ago it can be backdated (e.g., six months prior).
The owner of the policy would need to pay the backdated premium upfront, but this is not fraudulent as with the case of car or house insurance.
In Conclusion
If there is an effort to backdate to cover up for a claim which already occurred, it is typically always fraudulent and can have legal consequences. The legality of backdating can be particular and vary depending on the type of insurance, state, and specific conditions.
Backdating health insurance can also be possible, but policies and rules and regulations are decided by the state and employer. This act refers to the practice of dating a document, like a check, agreement, or binding document.
It is usually a date previous to what it should be. Backdating is usually forbidden and sometimes illegal or fraudulent, based on the situation.
