Universal Life Insurnace

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PostPosted: Sat Feb 07, 2009 6:16 pm   Post subject: Universal Life Insurnace  

My husband and I took out a Universal Life Insurance policy back in 1987. At the time my husband was 35 years old. On the policy and yearly statement is says year of expiry or maturity 2047 which would make my husband 95 years old. Our insurane agent called and told us "things have changed and your policy will end at age 68 unless you reapply for an updated policy which requires a physical and or blood drawing". Is this possible? I am sitting here with the original policy in my hands. My husband is rip roaring mad. We have paid this policy monthly for almost 22 years. Can someone please help? Are we being scammed? On our yearly statement is also says 2047 as year of expirary. What gives? Should we see an attorney? PLEASE HELP!

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PostPosted: Mon Feb 09, 2009 1:22 am   Post subject:   

louisew1953, before I comment is there anyway you could send me the most recent company statement?



Without actually seeing the actual most recent statement there is no way of knowing.



My contact information is readily available.



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PostPosted: Mon Feb 09, 2009 2:36 am   Post subject:   

In 1987, the universal life insurance policies on the market did not feature the no-lapse guarantee that newer policies offer. This guarantee says that no matter what the cash value of the policy is, the death benefit will be paid forever as long as the premiums have been paid (even if the cash value is $0). Just as technology gets better over time, the benefits of an insurance policy can act in the same manner.



Think of your current life insurance policy as a box that you are putting money into with each premium payment. Each month, the cost of insurance and administrative expenses are taken out of your box. The insurance company will credit an interest amount to put some money back into the box. The carrier reserves the right to increase the cost of insurance up to the maximum amount stated in the policy, and also reserves the right to lower the interest rate credited to the minimum amount stated in the policy. EX: Your current interest rate may be 5% with the minimum guaranteed value at 3%. The carrier could lower it to 3% at any time, but would have to do so for all policyholders, not just yourself.



If one day the box runs out of money, you will be required to put more into the box to keep the policy active - this amount may be more than your current premium depending on age and COI charges. Your policy will not lapse at age 68 if you keep paying premiums, but it may lapse if you do not pay the increased premium required to keep it going - your agent should be able to show you what it would cost to guarantee the current policy to age 100.



However, depending on your husband's health, he may be better off purchasing a new policy guaranteed to age 121 regardless of cash value. The current cash value of the policy can be used to in essence "buy down" the premium on a new guaranteed policy via what is called a 1035 exchange (tax free transfer of cash value to a new policy). Can you give us some details on the face amount, premium paid, cash value, and your husband's health? Might help in being able to determine the best course of action.

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PostPosted: Mon Feb 09, 2009 10:52 am   Post subject:   

Very well written explanation!







Razz ...and now I'm Evil or Very Mad mad Evil or Very Mad because I didn't write those words... Wink



But fear not... I have copy & paste skills and I'm going to plaster that on "other" boards but I'll link back and give dgoldenz credit.



Here's the part I don't get.

louisew1953 wrote:

Quote:
On our yearly statement is also says 2047 as year of expiry


That's why I asked to see the annual statement. If the company statement says the policy lapses in 2047 then they don't have an issue and their insurance is fine, that doesn't mean it couldn't be better.



So..... louisew1953 .... without seeing the actual statement there is no way to advise what's going on.


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PostPosted: Mon Apr 27, 2009 12:30 pm   Post subject:   

Spam much?

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PostPosted: Tue Apr 28, 2009 12:09 am   Post subject:   

Both the company and the agent are correct. There is not a contradiction. The problem is that you, along with most people, don't understand universal life insurance.



The company is correct. The policy does mature in the year 2047 at age 95. This is the age at which the insurance company assumes that everybody is dead. At 95, the cash surrender value will equal the death benefit. Depending on the insurance company and the state, the death benefit may need to be paid even if the person is still alive. Unfortunately, since the person is still alive, all gains will be taxed as income and it won't be treated as life insurance. If the policy can remain in force, no further insurance costs will be paid.



The insurance agent is correct. If you keep paying the same premiums that you have been paying based upon the current assumptions, the policy will expire when your husband is 68. It will last to age 95 if dramatically increased premiums are paid. The other option with a universal life policy is to apply for new coverage. If he's healthy, this is probably the better way to go.



If this is the same agent that sold the original policy, get rid of him. You should have known that this was a problem long before now.



UL is nothing more than annually renewable term insurance and a side fund. The cost of insurance increases every year. The problem is that annually renewable term insurance is not meant for a permanent insurance need. People buy UL policies when interest rates are high and don't realize what will happen when interest rates drop.

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PostPosted: Tue Apr 28, 2009 2:37 am   Post subject:   

Quote:


If this is the same agent that sold the original policy, get rid of him. You should have known that this was a problem long before now.





Why get rid of him? There was no UL policy with a no-lapse guarantee back in 1987, and at the time the coverage was probably scheduled to run until 95 or 100.....then the company likely raised the cost of insurance, lowered the interest rate, or both. The agent couldn't have sold a product 20 years ago that didn't exist - it sounds like he received an annual statement and noticed that the policy is set to lapse in a short period of time, and is giving them other options. If I were the OP, I'd be seeking a more detailed explanation than what was given. Looks like the OP is just paraphrasing what the agent said, and I'd probably bet the agent laid it out well enough.
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PostPosted: Tue Apr 28, 2009 9:02 am   Post subject:   

Quote:
Why get rid of him? There was no UL policy with a no-lapse guarantee back in 1987,




If coverage till the age of 95 years was not an option at the time when the OP had purchased it, why she was told that way. Can't this be termed as miss-selling?

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PostPosted: Tue Apr 28, 2009 9:22 am   Post subject:   

I tend to agree with Gary, without knowing the texts written in the policy contract its hard to suggest anything. With some universal plans the premium rates remain fixed through out the life of the plan. But the other may not have the option.



However, the main point here is that the policy holder wasn't aware that these changes might take place during the tenure of the policy. I dunno whether it was mis-selling or not. But there certainly was some miscommunication between the agent and the insured.


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PostPosted: Tue Apr 28, 2009 10:15 am   Post subject:   

Quote:
Why get rid of him? There was no UL policy with a no-lapse guarantee back in 1987, and at the time the coverage was probably scheduled to run until 95 or 100.....then the company likely raised the cost of insurance, lowered the interest rate, or both. The agent couldn't have sold a product 20 years ago that didn't exist - it sounds like he received an annual statement and noticed that the policy is set to lapse in a short period of time, and is giving them other options. If I were the OP, I'd be seeking a more detailed explanation than what was given. Looks like the OP is just paraphrasing what the agent said, and I'd probably bet the agent laid it out well enough.




The reason for getting rid of him, they are just finding out now that the policy wasn't going to make it until 95. A policy won't go from being able to last to age 95 to only being able to make it to age 68 in one year. This means that the agent wasn't paying very close attention to this particular client. The agent should have known long before now that the policy wasn't going to make it to age 68.



He either failed to communicate this to the client or failed to communicate this to the client in a way in which the client could understand. Either way, a new agent is needed.



This illustrates another problem with UL. The product needs monitoring. However, since there is little to no compensation for the agent to do this monitoring, the policies tend to get ignored.



The agent may have laid it out well enough in the beginning, but clients don't have elephant memories.
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PostPosted: Tue Apr 28, 2009 12:58 pm   Post subject:   

Quote:


The reason for getting rid of him, they are just finding out now that the policy wasn't going to make it until 95. A policy won't go from being able to last to age 95 to only being able to make it to age 68 in one year. This means that the agent wasn't paying very close attention to this particular client. The agent should have known long before now that the policy wasn't going to make it to age 68.



He either failed to communicate this to the client or failed to communicate this to the client in a way in which the client could understand. Either way, a new agent is needed.



This illustrates another problem with UL. The product needs monitoring. However, since there is little to no compensation for the agent to do this monitoring, the policies tend to get ignored.



The agent may have laid it out well enough in the beginning, but clients don't have elephant memories.




How can you be so sure that it did not go from age 95 to age 68 in a year or two? Maybe it went from age 95 two years ago to 85-90 last year to 68 this year. Without seeing the policy, that's not really something you can assume. If the carrier maxed out the cost of insurance and minimized the interest crediting, it very easily could have a massive drop in a single year. Going out and trying to find another agent may lead to a case of the grass not always being greener on the other side of the fence. It's not like the agent is coming to them when he is 67 and telling them the policy will end at 68 - if my math is correct, he's letting them know about 13 years ahead of time that something needs to be done.
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PostPosted: Tue Apr 28, 2009 7:48 pm   Post subject:   

Either way, the client needs a new policy with a no lapse guarantee.

Back in '87, the projected values were up there a bit, so it obviously was presented by the values. Of course, as we know, the projected values never work out. It's usually somewhere between the guaranteed values and the projected values. And of course, we all know of that little thing called "Target Premium" which was probably there and never explained correctly. Should they get a new agent....I say it's up to them, as always.



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PostPosted: Tue Apr 28, 2009 9:08 pm   Post subject:   

Quote:
How can you be so sure that it did not go from age 95 to age 68 in a year or two? Maybe it went from age 95 two years ago to 85-90 last year to 68 this year. Without seeing the policy, that's not really something you can assume. If the carrier maxed out the cost of insurance and minimized the interest crediting, it very easily could have a massive drop in a single year. Going out and trying to find another agent may lead to a case of the grass not always being greener on the other side of the fence. It's not like the agent is coming to them when he is 67 and telling them the policy will end at 68 - if my math is correct, he's letting them know about 13 years ahead of time that something needs to be done.




I know that it didn't go from 95 to 68 in a year or two because I understand insurance. It's something that you should know also. Interest rates have been very low for quite a few years now. Even if a company minimized the interest crediting, the drop would have not been a large drop from what they were doing the few years before that. Since sudden interest rates wouldn't have done it, there would have had to be a massive increase in the cost of insurance. Name a company that has had a huge increase in their cost of insurance. You can't because there haven't been any.



My issue here is that the clients are being caught by surprise. This is either an issue of the agent not communicating or communicating and the client not understanding. Either way, it's not a good agent/client match.
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PostPosted: Tue Apr 28, 2009 9:11 pm   Post subject:   

Quote:
Either way, the client needs a new policy with a no lapse guarantee.

Back in '87, the projected values were up there a bit, so it obviously was presented by the values. Of course, as we know, the projected values never work out. It's usually somewhere between the guaranteed values and the projected values. And of course, we all know of that little thing called "Target Premium" which was probably there and never explained correctly. Should they get a new agent....I say it's up to them, as always.




I wouldn't make that assumption without knowing what the client wants/needs. There current contract may be the best for them. Term might be the best. Whole life might be the best. No insurance might be the best. A new UL may be the best with or without a no-lapse guarantee.
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PostPosted: Sat May 02, 2009 4:37 pm   Post subject:   

Yes, you're right, I was assuming. However, I was assuming that because they are mad about it not going to age 95 like they were lead to believe. I just can't see them continuing to pay on a policy that they know is going to lapse in 12-13 years!

The other thing...if they do need a new UL policy in what situation would they not want a guaranteed NL policy? Are you saying they might need another policy to put them right back in the same situation later when they don't have the time/money to fix the problem?

I know very well that in order to steer them in the right direction there would be more information needed.



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