What happens when you apply for an individual disability insurance policy right around your birthday? Disability insurance rates are based on your actual age and change on your birthday.
If you are approved on or before your birthday, you can lock in your rate based on that age. If you are approved soon after your birthday, you may request to “save age.” This means the policy will be backdated to the day before your birthday.
How do you know if this makes the most sense to you?
It’s all in the math. If you backdate the policy, you must pay premiums as of that date. Therefore, if you backdate only a few days or weeks, you are not paying a lot of premium but are locking in a lower rate.
For some clients, backdating will require them to pay several months of premium. If this is the case, you need to calculate how much additional premium you are paying vs. how much premium you are saving. Project how long it will take to make up this loss. If it requires you more years than the amount of time you plan to keep the policy, don’t backdate. If you will make up the premium in your projected period of time, it makes sense to backdate the policy.
For more information about backdating individual disability insurance policies or to request a quote, contact Set for Life Insurance today!