Every universal life policy sold, is sold as a permanent product. I don’t think there is anything left to the imagination when the word permanent is used. It should never go away.
I can assure you that no agents sell universal life policies and tell you that the premium will be this much for so long and then it may go up a little, or maybe a bunch, and at some point it could very well become unaffordable.
So, a good working definition for a permanent policy if you are a consumer is, “a policy that is guaranteed to always be there and the cost is guaranteed to stay the same”. Sounds like a reasonable goal and a good product. And that is exactly what you should insist on when purchasing a universal life policy.
Unfortunately for consumers and for the industry’s reputation, agents very often try to make things cheaper to win the sale and in doing so they lean on the appearance of a policy that will do what you want, but it isn’t guaranteed. Why would an agent do that?
If Agent A proposes a $100,000 universal life policy with a monthly cost to $120 and Agent B says they can get you a $100,000 universal life policy with a monthly cost of $92, and Agent B says, “same benefit, lower cost, save you thousands over the life of the policy”, most people will go with Agent B. He wins the sale. Life insurance agents get paid when they make a sale.
The problem is in the guarantees. Agent A is offering a policy with a level premium guaranteed to age 100. The death benefit remains level and is guaranteed to age 120 even though you don’t pay a dime after turning 100. Agent B is offering a policy that “assumes” that it can do the same thing, but on the guaranteed side of the policy the coverage will lapse at age 82, about the time most folks are starting to dig out their policies and make sure their life insurance ducks are in a row.
If you are considering purchasing a universal life policy, insist that the agent show you the guarantees. Don’t buy it unless it is guaranteed to an age where you know you will be dead. Remember, this is permanent insurance.
If you have a universal life policy and especially if you have a variable universal life policy, get an in force illustration from your company and have it analyzed by someone other than the agent that sold it to you. Why? I don’t think I would be exaggerating to say that 75% of universal life policies in force today will fall apart prematurely even if you pay the premiums in full and on time. If you ask the same agent who sold you the policy to analyze it, chances are he will make you believe everything is just fine. A reputable independent agent will let you know exactly what you have, exactly what the guarantees are and honestly what you should do.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.