I don’t think there is a topic I have ranted and raved about more than the universal life insurance products with non guaranteed cash value features that are collapsing left and right due to the low interest environment imposed by the Fed over the last 15 years. Many clients were misled by unscrupulous, or just plain stupid, life insurance agents who refused to look at the writing on the wall by not believing that interest rates could eventually be too low for too long and eat the foundation right from under the policies.
So this begs the question, do you ride the ship until it sinks and you lose all the cash value and all of the life insurance you’ve paid for over the years or do you take what you have left and take decisive action to at least bolster up the most important part of your plan, the life insurance. If there is no cash value left and prices have begun to rise, take heart in the fact that while you lost the war, you’re still alive and there are ways to fight on to protect your family. First swallow the pill and cancel the insurance. When the price starts going up on a universal life insurance, indexed universal life insurance or variable life insurance policy, it is a one way march to a place where you can no longer afford it.
Whether your health is great or marginal it is prudent to start looking at term or no lapse guarantee universal life policies to replace what you thought you had. Both have guaranteed level premiums and death benefits that can last from 5 years to a lifetime, depending on your life insurance needs. This is a good time for me to interject that, while cash value was sold to you and made to seem like a panacea for your retirement, in 100% of the cases your best bet would have been to buy a fully guaranteed term or no lapse universal life and put all of the extra money under your mattress. If you had you would still have your money and life insurance.
If you still have cash value in your universal life insurance you aren’t trapped into using it to pay the increasing premiums that will eventually devour it all. There is an IRS jewel that can save and use your cash value through what’s call a 1035 exchange to move into a new policy and lower its’ cost and help guarantee the premiums remain level for as long as you need. This can be done with both no lapse guarantee universal life or a product carried by some more progressive companies that offers a term life insurance policy guaranteed up to 30 years, on a universal life chassis.
Bottom line. There is a way to escape your imploding universal life policy and never go down that road again, but it starts with admitting that someone in the beginning misled you and a true desire to salvage at least the death benefit. That opportunity won’t last long. If you have questions or would like to figure out how to get your life insurance back on track, call or email me directly. My name is Ed Hinerman. Let’s talk.