Life insurance Cost of Insurance (COI) rate increases have caused significantly higher premiums for some Universal Life (UL) policyholders since 2015. COI is set at an initial current charge when the policy is begun, but life insurance companies can raise COI rates up to a higher level, up to the guaranteed maximum. COI increases typically drain policy cash value accumulation shortening the time the policy remains inforce without increased premiums. Caught in a squeeze of cash value dwindling down to zero, the policyholder is forced to choose between increase premiums or having the policy lapse. Particularly older policyholders with large death benefits experience significant premium increases. Policyholders become trapped due to advance age of poor health that prevents them from replacing their policy. Current assumption UL (CAUL) policies, or for that matter Indexed Universal Life (IUL) policies, are susceptible to COI increases. Just compare the gap between the guaranteed side and non guaranteed side of the illustration for cash value and projected lapse year. Universal Life (UL) policies written in the 1980’s and 1990’s are considered particularly flawed in their assumptions. How will this play out with Indexed UL policies in the future?
Permanently Protected
There are life insurance products that consumers can count on to be truly permanent. UL products are offered with a no-lapse guarantee to protect the policyholder at a fixed premium for whatever duration. Multiple carriers offer Guaranteed Universal Life (GUL) products with lifetime no-lapse benefit guarantee, a secondary guarantee, coverage to age 120 or beyond at a fixed premium. Even some Indexed UL products have lifetime guarantees (GIUL). Whole Life has lifetime coverage and fixed premium guarantees.
Policy Review
A careful review of a policy’s annual statement is more important than ever. Don’t assume you have a Whole Life policy. Many policies bought over the last 35 years are in fact Universal Life plans. Do not assume because the cash value in the policy has increased over the year that the policy is safe. Does the policy have a lapse protection rider? Does the policy have a lifetime no lapse guarantee? If not, what year is the policy projected to lapse at current premiums? Policyholders facing COI increases first need to assess the situation by requesting an inforce illustration from their carrier. The illustration with show current cash value, project how much time the policy will remain inforce at the current premiums, and depending on how comprehensive an illustration, project the premium increase required to keep coverage in force. Choices at that point will depend on how many years the policy is projected to remain inforce at current premiums, the insured’s age and health.
Guaranteed Products: (recommended)
Whole Life
Guaranteed Universal Life (GUL)
Guaranteed Indexed Universal Life (GIUL)
Guaranteed Survivorship Universal Life (GSUL)
Non Guaranteed Products:
Universal Life (UL)
Indexed Universal Life (IUL)
Carriers and Parent Companies with COI Increases on Certain Universal Life Insurance Policies
August 2015
Transamerica, parent company
Transamerica
August 2015
Legal & General America, parent company
Banner
William Penn
August 2015
Jackson National, parent company
Reassure America
September 2015
AXA Financial, parent company
US Financial Life
October 2015
Voya Financial, parent company (formerly ING)
Security Life of Denver: Life Insurance Customer Service Tel. 877-886-5050
Reliastar Life Insurance
Effective January 1, 2016
AXA Financial, parent company
“Athena Universal Life II” policies; policyholders may request an inforce illustration to show policy values projection
special toll free number (888) 994-1899 for policyholders, Life Operations Center
March 2016
AXA Financial, parent company
AXA Equitable
March 2016
Transamerica, parent company
Transamerica
Effective June 1, 2016
“Lincoln” Lincoln Life & Annuity Company of New York administrating agent and reinsurer
Certain policies issued by Aetna Life Insurance and Annuity Company (now Voya Retirement Insurance and Annuity Company) between the years 1983 and 2000.
Lincoln’s Life Care Center special support team for policyholders affected call toll free 800-334-7586
request an inforce illustration by emailing mylifeillustrations@lfg.com or calling 800-334-7586
Effective October 9, 2016
some Legend Series Universal Life policies issued by Jefferson Pilot (now Lincoln National Life Insurance Company) between the years 1999 and 2007
Contact me for no cost policy review or free quote
Sean Drummey
phone: (910) 328-0447
email: spdrummey@gmail.com
Note: carrier list and changes compiled on 8/24/2016 is accurate to the best of my knowledge.
Last updated: 9/19/2016, carrier list and changes are accurate to the best of my knowledge. Please contact the carrier directly for full details.