Jul12

Taking Action: What Universal Life Policyholders Can Do Now

If you have been struck with steep increases in your universal life insurance policy, you may feel faced with two equally unappealing options: You can either pay what for many policyholders amounts to thousands of dollars a year in premium costs, or you can forfeit the policy and lose both the death benefit and all the hard-earned savings you’ve contributed to your account throughout your lifetime. (Read more about universal life insurance fraud.)

But other options may be available to you. Review these key tips about universal life insurance policies to assess your situation.

Check the status of your policy.

Contact your insurance provider and request a current report, or current illustration, of where your policy stands today. This should include the cash value along with a projection for how long the policy will remain in force at the existing premium.

Review the fine print in your contract.

Universal life insurance contracts vary from provider to provider, and even policies from the same provider can contain different terms based on when it was written. The key to understanding how your specific policy operates and what obligations and rights your insurer has with regard to raising premiums and guaranteeing savings lies in the fine print.

In particular, look for mention of these elements: A minimum guaranteed interest rate. Maximum contractual charges. Monthly interest rate deduction.

Deciphering the language of these contracts is not easy. If you need help understanding your policy, consult your legal advisor. (Read our “Guide to Understanding Universal Life Insurance Policies.”)  

Shop around for a new policy and compare costs.

Depending on your age and health and the severity of the increases in your existing policy, you might be able to qualify for another, more reliable policy—at a lower price—to secure a death benefit. If this isn’t an option for you, consider contracting an insurance agent to help shop your policy around on the secondary market for life insurance.  

Talk through your options with your insurer.

In certain instances, you may be able to negotiate with your provider to retain your death benefit but reduce its annual cost. Ask your insurer about potentially lowering your policy’s face-value amount. If your cash reserves are low, this will help them cover the policy’s costs for longer.  

Make your case heard.

Thanks to the efforts of consumer watchdog groups, such as the Consumer Federation of America, which has already alerted state insurance commissioners to the issue of unfair universal life insurance policy overcharges, state leaders with the power to take action should be well aware of the problem facing many policyholders. Find your state’s insurance regulators and contact them. Reach out to your political representatives and share your story.

Consider your legal options.

If you have experienced excessive overcharges on your policy and suspect the increase may violate the terms of your contract, you may want to consider taking legal action against your insurer. Consult your trusted legal advisor or an experienced insurance litigation firm to determine whether this course of action is right for you.

Vinas & Deluca is working with Rivero Mestre to prosecute cost of insurance increase cases against Principal Life Insurance Company. A copy of the complaint can be found here. If you or someone you care about has a policy from Principal and have seen their cost of insurance rates increase dramatically, please give us a call.