Effective Date Definition
Dictionary of Insurance Terms and Definitions
A life insurance policy's effective date is the date on which coverage begins.
A life insurance policy is in force from the effective date forward in time. If the individual insured by the policy in question were to die before the effective date, the policy would not cover the death; no death benefit would be paid.
A life insurance policy's age basis is based upon the policy's effective date, and your life insurance rates are affected by your policy's age basis: the younger the insured individual is on the policy's effective date, the less expensive coverage will be.
The effective date may differ from the policy's date of issue. The date of issue occurs when your life insurance application has been accepted and you have made your contract binding by signing the insurer's offer and paying your first premium.
The effective date can actually be set as a point in the past, after your policy has been issued. The practice of setting a policy's effective date for a point is the past is known as backdating. The purpose of backdating is not to provide coverage for a death that has already occurred but rather to reduce the age basis of the insurance policy, allowing a price break for the policy owner.
