One of the primary factors in the price of a life insurance policy is your age – a 38-year-old will end up with a slightly lower price than a 39-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 “Saving 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 premiums from that start point.
Saving age works due to the way that insurance carriers process dates on life insurance applications. The date that dictates when your coverage 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.
You see, by moving the policy date on your application backwards, your agent can set your policy to be ‘active’ before it’s actually placed inforce. When your policy actually makes its way to you, you’ll need to pay the premium payments that have passed since your policy date in order to get everything squared away and place your policy inforce.
You can think of saving age as moving your policy backwards a few months so that it’s technically active before your age increases. You pay for the months you scoot past up front, and lock in the lower rate for your lower age. This also means that you’ll be losing a 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.
Saving age to lock in 36-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 you decide to run a quote using our free online tool, try tweaking your birth year to see how your price could shift based on changes in age. If saving age would save you money in your application, your agent will be able to walk you through your options for reducing our price.
Photo credit to: Jason Costanza