What is your life insurance age? Well, if you are within 6 months of your next birthday, most insurance carriers act like you already blew out the candles. What this means is you will be paying higher insurance premiums for your life insurance coverage if you are past your half-birthday.
Whenever we help our clients move forward with life insurance coverage, we always consider their insurance age by implementing a strategy called “saving age”. The best way to describe this is by using an example…
John’s birthday is October 1st, 1976. As of today (4/1/16), he is 39 years old. But what is particularly important about today’s date is this is John’s half-birthday. If he were to obtain a life insurance policy now, most life insurance carriers will act as though he has already turned 40. This means his insurance premium will be higher than if he he had obtained the coverage just one day earlier.
Assuming John is a preferred underwriting risk (reference our 3/15/16 post about underwriting classifications) and obtains $1,000,000 of 20-year level term coverage, his premium at age 40 is $813.20 annual. But if he “saves his age” at 39 and requests a backdated policy issue date of 3/31/16 (1 day before his half-birthday), his premium will be based on age 39 rates — which is $766.80 annual. This represents a premium savings of $46.40 annually. Over the full 20-year term coverage period, the total premium savings would be $928!!
A common complaint John might have about backdating his policy to save age is he will end up paying premiums for a period of time in the past in which he technically wasn’t covered. Since backdating is usually available for only up to 60 days, it can still make a lot of sense to pay premiums for 1-2 months in the past in order to save significantly over the life of the insurance policy.
This is an example where having an independent insurance broker acting as your advocate can really pay dividends.