IPTM8045 - Term and premium paying term: date on which policy is made and backdating of policies

Date on which a policy is made

The date on which a life policy is made is a contractual matter determined by general contract law. The insurance contract is made when both parties have communicated to each other that they accept the proposed terms of the contract. If the offer of contract is accepted in writing then the date of posting is regarded as the date that the contract is made, not the date of signing or date of receipt. The date of commencement of the policy will usually be shown on the policy schedule.

Backdating of policies

The qualifying policy rules specifically allow for the start date of the life cover provided by the policy to be backdated for up to three months before the policy was actually made (ICTA88/SCH15/PARAS 1(8)(b), 2(3) and 3(2)). Then the earlier date is treated as the day that the policy was made for the purposes of the rules on policy term and premium paying term, and on ‘premium spreading’ - see IPTM8055.

Circumstances in which backdating may apply are where temporary cover is given, and premiums are paid, while the full insurance contract is being arranged

If, however, the policy is backdated by more than three months from the date it was made then the qualifying policy tests must apply from the later date of execution. Any premiums paid under the policy for the period of backdating count for the premium spreading tests -see IPTM8055, and for the test of the minimum sum assured - see IPTM8030.

Backdating of policy - examples

Suppose an endowment policy was made on 15 November 2018, with a backdated start date of 10 September 2018. This is within three months of the date the policy was made so for the purpose of the qualifying policy rules the term of the policy is measured from this earlier date. This means that the policy would only need to run until 10 September 2028 to satisfy the minimum ten-year term test.

If, however, the policy had been backdated to 10 June 2018 then the term of the policy must be measured from 15 November 2018, because the backdated start date is more than three months from the date the policy was made. This means that for the qualifying policy rules, the policy must run until at least 15 November 2028.