Life Insurance Age Reduction Rules
A driving factor in the cost of a life insurance policy is the age at which you purchase the policy. The older you are, the more expensive the policy will become. Because of this, it's generally a good idea to buy life insurance at a younger age. But there are two ways you can save money on a policy using age reduction rules. The first refers to "save age," while another age reduction rule applies to group life insurance.
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Backdating
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Backdating, also called "saving age," refers to a policy that most life insurance companies allow for buying life insurance in any given year. A life insurance company will allow you to purchase life insurance, treating your age as the youngest possible age, in any given year regardless of what month it is. For example, if you are 30 and born in January, the insurer may allow you to purchase insurance as though you are age 30 even if you are one month away from your 31st birthday. This lowers the premiums you would otherwise have to pay.
Not all insurance companies offer this, though many do. You must check with your insurer prior to applying for a policy.
Group Life Age Reduction
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Group life insurance may offer you the ability for significant premium discounts if you buy your life insurance policy prior to a certain age. The discount happens after you reach the target age. For example, if you purchase life insurance prior to age 70, the insurer may give you a substantial discount (i.e. 60 percent or more) on your premiums once you reach age 70. This reduction can dramatically affect your premiums and thus the affordability of your policy.
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Benefit
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Age reduction rules are ways that insurance companies can save you money on the cost of your insurance policy. Insurance companies that have strong cash reserves, or that can otherwise afford the risk of discounting premiums, may provide you with a way to lower your premiums despite the fact that you are getting older. This might allow you to keep a policy that you otherwise would not be able to afford. Your family would end up with money that they need when they otherwise wouldn't have it.
Consideration
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When considering buying life insurance, check to see if your employer has insurance that allows for either a backdating option, an age reduction rule, or both. The savings in premiums might allow you to buy more insurance than you otherwise would be able to afford over the long term. You must inquire about this prior to purchasing a policy, though, since not all companies offer these types of savings.
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