Are you looking into insurance and wondering what exactly backdated policies are, who can claim them and whether they are worth it? If so, then this guide is sure to answer any questions you may have.
Find out what a backdated policy is, and how they differ between different types of insurance policies, such as automobile, health insurance, and life.
Table of contents
What Is A Back Dated Policy?
A back-dated insurance policy is when coverage is bought so that it can cover claims for an event that has already happened.
This type of insurance policy is bought when the total amount that a claim may be is unknown and this could lead to potential delays in the payment as a result.
Most insurance companies sell backdated policies for sales reasons as it can save the person purchasing the cover money. It is only possible to backdate life insurance or other commercial general liability insurances.
A commercial general liability insurance cover offers coverage for claims specific to personal injuries, such as libel or slander, bodily injury, advertising injury, or damage to a property as a result of business operations, such as the company’s products or premises.
Most of these insurance policies can be backdated up to a maximum of six months, depending on the situation. Backdated policies are offered within a package that also includes property, crime, or automobile insurance.
Many companies also purchase backdated liability insurance as a way to cover previous activities of a gap within two different policies.
Backdated policies are mostly only offered by insurance companies when they can charge premiums that would then cover the total final cost of the claim and the value of the investment of the premiums.
Many people worry or believe that backdating an insurance policy is illegal but this is not entirely true.
Only certain people in certain situations can purchase this type of insurance, making it legal for them but for others who are not going through the covered scenarios it is illegal for their insurance policy to be backdated.
These types of policies are normally sought after as they can often help people save money.
Backdating Life Insurance
When you reach a certain time in your life, life insurance will be a natural consideration. This may be because you have started a family or intend to start a family.
Life insurance offers financial security, helps to pay general living expenses, as well as helps with debt repayments and any medical or end-of-life expenses that one can expect and be left with after a death.
This insurance protects your spouse and children financially as they would be left with the aforementioned financial burdens in the case of death. Life insurance can also enable families to rebuild their lives when a loved one has died.
Insurers look at a person’s age as to how old they are at the time of the application or their next birthday. Insurance policies can then be backdated up to 6 months to a younger age to help save money on the total cost of the plan.
While backdating life insurance policies can save money people must take time to research whether the overall savings are worth the initial expense as the premium will need to be paid for the backdated months and future premiums.
While backdating life insurance is not illegal it is illegal to take out life insurance for a relative who has already died, this is fraud, and those involved in this fraudulent activity will be jailed or heavily fined.
Backdating Health Insurance
Health insurance can be backdated so that a person would qualify for a lower premium as the backdating would make their age younger so they would fail into a lower age bracket. In America, some states do not allow backdated health insurance policies but some states do.
You can confirm whether your state allows for backdated policies by checking with your state insurance commissioner.
The two most important points to note regarding backdated health insurance are:
- If spouses become divorced and fail to let the insurance company know so that both spouses can remain on the same health insurance policy, the ex who is added as an additional person on the policy can be legally charged a repayment for any claims made on the policy for medical appointments, treatments, or services, from the date the divorce was filed up to when this wrongdoing is found out.
- If a company sues an employee it is illegal for the company to backdate the employee’s health insurance. Insurance companies can sue companies, in this case, to pay back out-of-pocket costs incurred by medical bills during the period when the employee believed they were covered
Backdating Automobile Insurance
Car insurance cannot be backdated, it is illegal. If car owners could backdate car insurance policies no one would bother to buy insurance until after being involved in an accident or causing damage to their or another vehicle.
This would ultimately affect the risk-assessment-based business model of car insurers and eventually lead to the car insurance industry being left out of pocket.
Lawsuits would also become more common and this would cause further delays within America’s already overburdened court system.
Reputable car insurance companies will never offer a backdated policy and so you must reconsider if the company you are purchasing a policy from offers this as an option.
Understanding the different types of insurance policies that can be backdated is incredibly important as the many faint lines within the insurance world can lead you and your insurer into serious trouble, facing fines or jail time.
Before accepting a backdated policy, always check first that it is legal by consulting your state’s insurance commissioner, and also calculate whether the backdated premium expense will be paid back over time by the savings you expect to have as a result of purchasing a backdated policy.
Also, check that the insurance company you are dealing with is reputable before purchasing a policy to avoid any potential issues or fraud.
Frequently Asked Questions
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.
Backdating is the practice of marking a document, whether a check, contract, or another legally binding document, with a date that is prior to what it should be. Backdating is usually disallowed and can even be illegal or fraudulent based on the situation.
If your life insurance policy lapses, then you forfeit your coverage and your beneficiaries won’t get a payout from the life insurance company when you die. If you stop paying your life insurance premiums and your policy lapses, you won’t be refunded any of the money you paid in premiums.