One of the primary factors in the price of a life insurance policy is your age – a 40-year-old will end up with a slightly lower price than a 41-year-old, assuming everything else about them is the same. Sometimes, even a difference of a week or two can be enough to raise the price on your policy.
Thankfully, insurance carriers offer an option to help you keep your price low. If your birthday passes during your application for insurance, and you become a year older, the carrier will let you lock in the price for the age you were when you initially applied by paying an increased premium. This is called “Save Age” on your policy.
What is Saving Age?
Saving age is a way to set the start date of your life insurance policy strategically, so that you can lock in the price for your previous age in exchange for paying a few months in premium up front.
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Saving age works due to the way that insurance policies are dated and activated. The date that dictates when your coverage actually begins is called the plan’s “Policy Date.” The age that you are on the official policy date for your application is the age that the carrier will use when they determine your final price.
By moving the policy date on your application backwards a month or two, your agent can make your policy ‘active’ before you actually sign the final paperwork.
You can think of saving age like paying to cut in line. You pay for the months you scoot past, and lock in the lower rate for the lower age. One downside of saving age is that you lose those few months of coverage at the end of your policy, because the months you pay for up front count towards the length of your policy. Most carriers only allow the applicant to back date up to six months and some carriers use “nearest age” vs actual age in determining age for pricing purposes.
Why Save Age?
We opt to save age on quite a few policies in order to lower the cost of a policy as much as possible in the long run. Depending on the number of months we would have to skip past, the monthly price of your policy, and the prices of your policy at both your previous and current age, it may or may not make sense to save age.
For example, imagine a 40-year-old male looking for a policy near his next birthday. He was originally quoted for $38/month. His age may roll over to 41 during his application, which would raise his price to $40/month.
Saving age to lock in 40-year-old prices would save this client $2 every month for the rest of his policy, in exchange for $38 for every month he moves his policy date back.
If he and his agent decide to save age, our customer would make his money back in 19 months, because the $2/month savings would match the additional $38 he’d have to pay upfront. If he had to save age for 2 months, he would break even in 38 months, and so on and so forth.
Given that we only offer life insurance policies that last ten years or more, saving age is almost always a great long-term money-saving option for our clients if we get an approval within a few months of their birthday.
However, depending on your age, the policy you’re looking for, and the medical issues that affect your risk class, it may sometimes be more cost effective to stick with your new age and prices. Our agents will always run the numbers for you during your official application, and make sure that saving age is the right call to save you money.
If saving age only happened near your birthday, things would be much easier for everyone. However, some insurance carriers look at your age a bit differently than most people.
How Life Insurance Carriers See Your Age
When a client applies for life insurance, carriers use one of two different numbers to keep track of their client’s age. The first way they see a person’s age is their “Actual Age,” which is how almost everyone looks at their own age normally. Using actual age, starting on the day of your 40th birthday, for example, you are 40 years old for the entire year until the day of your 41st birthday – then you’re 41. Easy, right?
The second way that carriers see the age of their clients is “Nearest Age,” and this is where things get a little tricky. Your nearest age is determined by the birthday that you’re closest to, even if it hasn’t happened yet.
For example, if you’re 40 years old, but you’re only 4 months away from your 41st birthday, you’re actually closer to being 41 than 40. This means that carriers that use your nearest age will offer you prices for 41-year-olds.
Due to the underwriting and pricing requirements that carriers need in order to issue an approval, certain carriers use actual age for their applications, while others use nearest age – they never use both. In some situations, “actual age” carriers offer better prices than “nearest age” carriers, and vice versa.
This is one of the reasons why some carriers show significant price differences over their competitors when you run a quote. If you’ve noticed that your carrier lists your age as one year older on your official paperwork, they are most likely using your nearest age to complete their paperwork.
Thankfully, it’s not your job to know which carriers use nearest age. When you run a life insurance quote on Quotacy, we always ask for your date of birth before we show you a list of prices. We’ve taken the age system each carrier uses into account, so you’ll always see prices that reflect what they’ll offer you.
Long story short, your age is a big factor in your final insurance prices, and if you apply on your own, a few months can lose you a lot of money in the long run. Having a team of experts like Quotacy on your side can help you compare prices and navigate loopholes to make sure you’re getting the best possible price for coverage.
About the writer
Eric started in Quotacy's sales department, but moved to marketing after helping hundreds of people through their life insurance buying journey. Aside from writing about buying life insurance, he also edits Quotacy's monthly newsletter, runs our YouTube channel and produces Real Life, our podcast. Eric lives in Minneapolis, where his coworkers are trying to convince him to take his humor into the spotlight. Connect with him on LinkedIn.