PONDERING THE QUESTION OF UNIVERSAL LIFE…

March 25, 2019 | By TERRI DICKERSON CDA Press Consumer Gal

If you own a Universal Life Insurance policy, you better dust off that binder and take a look at the terms.

The low-interest rate environment we’ve been experiencing the last 10 years doesn’t hurt just savers; it hurts life insurers, too. Or rather, the insured — because the costs are being shifted to the policy holders in the form of huge premium hikes.

A Coeur d’Alene reader called to lament a recent premium hike on his own Universal Life or UL Policy. He was contacted by the insurance provider and told that his premium would be going up over 300 percent from one month to the next.

Not understanding the reason behind such a huge increase, he did some digging and found out that he had purchased a Universal Life Insurance policy back in the late 1990s. He said he didn’t really know what he was sold because his insurance agent never clearly explained that the insurance company could increase rates at their discretion or take any shortfall out of the policy itself to make up the difference.

He’s been paying his premiums dutifully for the last 20 or so years. Because he’s older now, he’s retired and on a fixed income. When the premium increased from $233 to $733 a month, he had no choice but to surrender the policy. And it turns out he’s not the only one who is seeing these outrageous premium hikes. There are a lot of policy holders with Universal Life who have had to surrender their policies because they couldn’t afford to pay the higher monthly premiums.

So what happens to the money these policy holders have been paying all these years? You guessed it: It’s long gone and cannot be recovered. Our reader is upset because the insurance was supposed to help take care of his wife when something happens to him since he is older, but that isn’t how this scenario will play out. Instead, he paid premiums for years thinking he had an insurance “investment” to fall back on, only to find out it all went up in smoke.

Many times, an agent may sell you on the idea that a Universal Life insurance policy is a savings account, an investment account and an insurance account all in one. What policy holders are finding out is this isn’t necessarily true.

So is Universal Life worth it? Maybe, but it depends on your goals. Other insurance products worth exploring could be Term Life or Whole Life. Each has different features and benefits as well as terms.

My advice is when you’re talking to your insurance agent about purchasing life insurance, keep your goals in mind. If you want a life insurance policy that will take care of your beneficiaries if something happens to you, make sure that’s what you’re buying and that it is all fully explained to you. If the agent can’t or won’t explain what he/she is selling to you, it might be best to shop elsewhere.