What Can You Do If You Still Have An Old Universal Life Insurance Plan?


The Insurance BarnObviously, there are enough “less-than-honest” insurance agents operating in society.  Between them, the comedians, media and politicians who have slandered my industry in the last few years, it does not surprise me that insurance agents get the same level of respect as used-car salesmen.

I have found that it works better if people like me for who I am before they are repulsed by what I do.  As a result, like I mentioned yesterday, I do not go out of my way to tell people what I do for a living.  I am not ashamed to be an Insurance Counselor but I do not see the need to cause alarm when it is not warranted.

INSURANCE AGENT GREED

In the 1990s members of my industry earned the reputations all insurance agents now share.  They sold life insurance as if it were a retirement plan rather than for the death benefit it provided.  Universal Life insurance was easier to sell and paid a significantly higher commission than Term Life.

Law suits abounded against many of the Life insurance companies.  At that time, people who purchased Universal Life insurance as a retirement plan were given the opportunity to make adjustments to something more appropriate.

POLICYHOLDER PROCRASTINATION

Apparently, not everyone got the memo.  My wife and I were at a dinner party last week with some friends.  One gentleman commented about a Life insurance policy he and his sister are paying for on his father.  The policy is over 30 years old.

I saw no reason to illuminate my friends with my vocation at that time.  However, once a problem with a life insurance policy was brought up, I took the man aside, gave him my card and offered some options for him.

His father did not take advantage of the offer to adjust his policy during the 1990s.  He is now experiencing the troubles that the insurance companies wanted to avoid.

TODAY’S OPTIONS

Compared to the millions of policies that were misrepresented by insurance agents in the 1990s as retirement plans, the thousands of old Universal Life insurance plans that still exist are tiny.

If you or a loved one still has one of the old, pre-1990, Universal Life insurance policies, contact an Insurance Agent you trust and have them reviewed.

Those plans were sold at a time when interest rates were in the double-digit area.  Today, interest rates are significantly lower than what was illustrated.  You may find that your policy will lapse or charge you an outrageous premium in the near future.

If you have a plan like that, although your right to return it to your insurance company for adjustment may have expired, you can still trade it in for either a type of insurance that has more guarantees or use what money is still left in it to fund a true retirement plan with an annuity.

WARNING

(When you are shopping for Life insurance, be careful.  There are still plenty of insurance agents, who do not know any better, who are trying to pass off Universal Life insurance as a retirement or college savings fund.  Universal Life is neither.  Universal Life is a fine Life insurance plan when it is used appropriately.  It is not an investment plan.)

UPDATE

In September, 2012 another one of the laws that regulate insurance company use of  Universal Life Insurance was modified.  The regulation known as AG-38 requires insurance companies to place more money into reserves in order to pay the death benefit of Universal Life Insurance.  

The initial reaction to the new regulation saw several insurance companies suspend sales for new Universal Life insurance policies until after the first of next year.  Some insurance companies continued to sell Universal Life insurance as if nothing had happened.

If you are considering the purchase of a Universal Life insurance plan, be advised that the premiums for these types of plans are expected to increase by another 20-40% after the first of the year.

Just when I was starting to think that the bugs in Universal Life insurance had been worked out and it was safer to sell, regulations are changing.  Apparently, there are still problems.

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