Insurance Policy Backdating, by definition, is the practice of putting a calendar date on any document that is earlier than the date on which that document was actually written. In some instances, it’s perfectly legal. In other instances, it’s not. Let’s look at how backdating affects different aspects of car insurance, health insurance and life insurance.
Backdating Car Insurance Policies
Backdating a car insurance policies is illegal and something no reputable insurance company or agent would ever do. How come? Because it implies that you had coverage on your vehicle before you actually did. If you could do this, nobody would ever buy car insurance until after an accident happened. That would have the effect of turning the car insurance industry’s risk-assessment-based business model on its head. Before long, there would be no car insurance industry and we’d all be paying for damages and injuries out of pocket. Lawsuits would inevitably skyrocket, clogging our already over-burdened court system.
The only people who would benefit from that would be trial lawyers. Okay, that’s the extreme outcome. Closer to home, consider this: backdating a car insurance policy is insurance fraud. If you’re caught doing it you risk fines or imprisonment, as does the agent who agreed to do it.
Backdating Life Insurance Policies
What you pay for a life insurance policy is based in part of your age at the date of issue. The insurer will either use your actual age or the age you are nearest to based on the birthday you’re closest to. It is legal to backdate a life insurance policy by up to 6 months to help you get the lowest rate allowed for that age. While that can theoretically save you money, you need to realize that you’ll have to pay the premiums for the months covered by the backdate. You’ll have to do the math to see if the overall savings realized for backdating your age are greater than the cost of the additional monthly premiums. Of course, any attempt to purchase a backdated life insurance policy on your Aunt Minnie who has already passed, is plain out fraud. But you knew that.
Backdating Health Insurance Policies
In regards to health insurance, backdating the effective date of a policy can be used to make your age at issue qualify for a lower premium. That can be a good thing. State laws differ in their policies about backdating health insurance policies, so you’ll have to check with your state insurance commissioner. Some states will allow backdating, but limit the amount to six months.
Important Points about Backdating and Health Insurance
- If you divorce and don’t tell the insurance company so that your ex can remain covered under your policy, your ex could end up being charged for any medical claims paid by the insurer all the way back to the date of the divorce.
- If you are laid off or terminated, it is against the law for your former employer to backdate your termination of health care insurance. That’s fraud and you can sue to recover any out-of-pocket costs you incurred for medical bills during the period you thought you were covered.