How do life insurance companies determine my age?

As we get older, the cost of life insurance increases. It’s important to understand how life insurance companies determine your age so that you can qualify for the best possible price. It’s common for life insurance rates to increase 10-15% each year, so understanding this concept is very important.

Most life insurance companies use the age you are nearest to and not your actual age. This is called age nearest pricing, and about 80% of all life insurance companies use this method.

That means your price will increase on your half-birthday with many companies. What you may not know is that most companies offer a way to get the lower price you would have received if you had purchased your policy before your half-birthday. This strategy is called backdating.

When you backdate a policy, you pay a little more money upfront to save money in the future. If my half-birthday were 2 months ago, I would need to pay the premium for those two months to qualify for a lower rate.

Let me give you an example of how backdating your life insurance works.

Todd is a 57-year-old engineer who is looking for $1,000,000 for the next 10 years. His birthday was 6 months ago, so most companies are now offering him what a 58-year-old would pay.

The cost for a 58-year-old is $221 a month. The price for a 57-year-old is $199 a month. That is $264 more a year for the next 10 years. That is a total increase of $2,640 over the next 10 years.

Todd was told that if he requested his policy start the date of his half-birthday, he could get the lower rate. After looking at the savings, Todd wanted to backdate his insurance policy.

Backdating is not always a good option for everyone, and it will likely depend on your specific situation.

Below is a list of companies who use age nearest pricing.

Age Nearest Pricing

• AIG 
• Banner Life
• Protective 
• John Hancock
• Principal 
• SBLI
• Pacific Life
• Ohio National 
• American National 

If you have any questions, please give me a call at 520-888-6900.