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Backdating in Insurance

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Backdating in Insurance
April 12, 2023

Table of Content

 

Backdating in insurance language means altering the start date of the life insurance policy to a time earlier than the originally date of buying the insurance policy. Suppose you bought a policy on January 1, 2013 but you realize later that had you purchased the policy two months earlier, you could have got it at better premium rates. Backdating allows you this. This will help reduce the premium liability for the insured during the policy tenure.

Advantages

  • You can pay lower premium by altering the policy start date and selecting the date that gives you better premium rates.
  • Backdating is useful for those who buy a life insurance policy to exhaust the section 80C limit on this year and start paying the premium on a monthly/quarterly basis from the next year.
  • Backdating comes handy when one has to buy a policy on a special day as one can anytime alter the official date to some important date during the year.
  • It also takes care of the maturity date to coincide with this significant date.
  • When your flow of income is not uniform throughout the year, if you buy the policy in this off season then you can get the policy backdated to the period of your maximum earnings.
  • Backdating helps you get return of investment earlier if you backdate the start date of the policy.

Points to note

  • As backdating directly affects the premium rate; it should be opted by people who are planning to purchase a policy at an older age. Most insurers hike the premium rates for the policyholders above 40 or 45 years. If you opt for backdating, you should move into the previous age bracket.
  • Backdating may work in endowment and money-back plans but for term insurance plans it is opposite. In endowment plan, the survival benefits accumulate much earlier. Whereas, with term insurance plan, the coverage tenure for the backdated period goes waste. The insurance companies lure buyer with 'zero sum game'. They increase the premium rate depending upon the age of the policyholder. The person pays for the lower rate however, ends up paying more for the backdated period instead.
  • So, ensure that the total savings in premiums is more than the extra premium paid for the backdated period.
  • HDFC Life offers numerous savings and investment schemes that are aimed at your financial growth. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans .

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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