Backdating Life Insurance: Know All About It

As the name suggests, backdating life insurance means changing your insurance policy's start date to earlier than the actual date of purchase/issue. For example, if you purchased a life insurance policy on 20th June 2020, but you eventually realised that you could have earned higher returns if you had purchased the plan in March 2020, you can ask the insurance company to officially change the start date of the policy to March 2020.In this case, you backdate the policy. Generally, the insurance companies in India do not charge any interest or penalty if the plan is backdated less than a month or before September. Remember, backdating in life insurance is allowed only for endowment policies and money-back policies.

When issuing a life insurance policy, the insurance companies consider the nearest age of the applicant. For example, when buying the plan, if you are 33 years and seven months old, the insurer will consider your age as 34. However, when backdating the policy by three months, the insurer will consider your age as 32 years 4 months, and you will be paying a lower premium based on a plan for 32-year-old.Another significant benefit of backdating life insurance is that you can reduce the policy tenure, and in turn, the maturity date. If you have an endowment policy, it is even better as it will start accruing benefits earlier.If you have multiple policies and investments, it can be difficult to track the maturity dates. But, when you backdate the life insurance policy to coincide with some important milestones in your life, it would be easy to keep track of the premium payment and maturity date.

While there are many benefits of backdating life insurance, it may not always be beneficial. Here are a few situations when you must avoid backdating life insurance policy.

• Backdating life insurance policy may not be useful if you are young as the premium amount may not change significantly. Backdating the plan is only useful when you buy a policy at an older age.
• When you backdate the policy, you may have to pay the premium for the backdated period. But, if you don't have enough funds to pay the premium, backdating would not be useful.
• If you have a term insurance policy, backdating the insurance will be useless as the backdated period is irrelevant.

So, before you backdate the insurance policy, you must ensure that the total savings in the premium are more than the premium paid for the backdated period.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.