When one learns that they could have enjoyed a lesser premium rate for the life insurance plan and term insurance, they really wish to turn back time. Backdating is something that will allow one to enjoy the benefits of lesser premiums without having to time travel. Backdating is a standard insurance practice that allows one to achieve all this.
 

What is backdating in a life insurance plan?

  

Backdating is the process of starting the coverage of the life insurance policy from a past date. The practice of backdating is completely legal and will not get the policyholder in any trouble. However, there are certain things one must know before they get a backdated policy.

 

Features of life insurance backdating rules
 

• One can only backdate up to 1st April 2013. This date is available in all the newer term insurance and life insurance plans.

• The policyholder will have to pay the accrued premium amount from the backdate in a single lump-sum payment. The insurance companies will also charge an interest rate on the premium amount. Therefore, one should confirm with their insurer before backdating a life insurance policy.

• The insurers often do not charge the interest if the policy is backdated only by a month.

• One will be able to enjoy lesser premium rates through backdating their policies.

• However, they should remember that the period of their term will also decrease.

• Backdating is only available for life insurance plans, endowment plans, and term insurance. They are not available for ULIP schemes.

• Many insurance companies might not be offering the backdating option for their insurance.
   

Benefits of life insurance backdating.
 

• Early maturity dates-

  
  In the case of endowment policies and other monthly savings plans, one has the option to backdate the policy. This will allow the individual to enjoy the maturity benefits earlier than anticipated. They can hence modify and include the maturity dates and benefits in their retirement plans.
   

• Choosing special dates-

  
  This is most advantageous for individuals who started the savings insurance policy for achieving a short term goal like vacation or marriage. They can change the date of maturity accordingly to coincide with special occasions. Therefore, a savings insurance policy essentially starts funding your goals.
   

• Lesser payment premium-

  
  Sometimes, people realise that had they taken the insurance only a few months prior, they could have paid lesser premiums. This is possible with backdating of the term insurance and life insurance plan. They will only have to pay the accumulated income along with interest to make this possible. If the backdate is less than a month ago, then the individual will not have to pay any interest for the policy.
   

• Tax^* benefits

  
  The backdating can also be used for tax^* benefits. This useful for people that want to save taxes^*, but their premium payment date is after the tax^* filling date. They can choose to backdate the insurance policy, and in doing so, they will have to pay a lump sum amount. The payment of the accrued premium will allow the person to tap into the power of Section 80C to reduce their taxable^* income.
   

Disadvantages of term insurance backdating rules
 

• Strenuous for bank balance-

  
  The backdating of the insurance policy can be financially strenuous for the policyholder as they will have to pay a lump sum amount during the start of the policy. And then, in the blink of an eye, the premium for the present term becomes due. Therefore, if you are a youngster, backdating should be the last thing on your insurance checklist.
   

• Enhanced-interest rate-

  
  The individual will have to pay an interest rate of around 10%. This rate is different for different insurance companies. Considering the rate of return of normal guaranteed1 returns life insurance policy, the interest is pretty enhanced. Therefore, one should consult with their insurer before opting for backdating.
   

• Term Insurance-

  
  Even though backdating is available for term plans, it should not be done. Since backdates the term plans, the protection provided in the previous period becomes irrelevant. Also, backdating shortens the coverage period.
   

• Not for young people-

  
  Young adults should not even consider the thought of backdating. The premium rate is not that different for people in their 20s. Therefore, youngsters will only be wasting money if they want to backdate.
   

• Only works with money-back or endowment plans-

  
  Even though backdating is also available for term plans and life insurance plans, they are only useful when done with a money savings plan. Because term plans and life insurance need not be timed like an endowment plan.
   

 

Tata AIA Term Insurance

Through the Tata AIA website, you will be able to buy term insurance online. They also have a wide variety of offerings with differing features. The plans offer the option of coverage till the age of 100. The plans offer decent premium rates, and some plans have flexible payout structures. You can also opt to get a return of premiums² at the end of the term plan. The schemes can be further improved with add-on rider^# options. 

Conclusion

Backdating a plan should only be reserved for those in their late 30s or mid-40s. One needs to discuss with their insurer to know about the charges of backdating. Or else, in search of lesser premium rates, they might end up paying more interest rate. Backdating endowment plans is one of the best tools one has to modify and their financial budgets.  

L&C/Advt/2023/Jan/0305