A major issue I saw in 2013 and one that will continue moving into 2014 is old Universal Life Insurance policies that were sold back in the 1980s and 1990s. With low interest rates as low as they are many of these policies are eating up cash value and heading toward lapse. How is this happening?
1. Increasing mortality (cost of insurance) that is going up with age.
2. Mortality costs being calculated on the old table and not the current 2001 CSO table.
On top of that there is the issue of bailing these policies out. Policyholders are either having to lose the policies, slash the death benefit amounts, or dump large sums of premium into the policy. If you do keep your policy inforce, most are level death benefit that are not even keeping up with inflation.
So what can you do to avoid the risk of your policy blowing up? I suggest you get an inforce illustration from your insurance company that shows the policy “as is” and meet with an agent to review it and make sure everything is in good order. You also might even find it to be more efficient to exchange that old policy for a new Whole Life policy which didn’t run into these problems the Universal Life policies are facing today.