As the economic stomach keeps on turning, I raise the cry once again for people with universal life insurance policies to get them reviewed. If a policy is not guaranteed to remain in force to age 100 or beyond with a guaranteed level premium, and hellooo, MOST AREN’T, these crazy economic times are going to start turning many of those policies into houses of cards that someone tried to build just one too many stories on.
I’ve hit on this subject a lot over the years, but in a recent post I laid out the case for why universal life policies will start failing at an even more alarming rate when huge investment pools like the mortgage market get turned on their head.
Remember that every UL has two sides illustrated, a guaranteed side which really doesn’t need explaining other than to say that it is what it says it is, and the current or non guaranteed side. It is often called the current side because it is theoretically a snap shot of how the policy would perform if everything remained the same as it currently was when the policy was approved for sale.
I believe that the companies that call it the non guaranteed side are really more accurate. The truth is that any change in mortality experience, company performance or interest rates can cause the non guaranteed side to become total fiction between your current premium and the next. That means that if your universal life is not completely based on guarantees, AND MOST OF THEM AREN’T (sorry for shouting), your next premium notice could well be the one that let’s you know that your old premium is now just a fond memory and if you want your policy, pony up a higher amount. And by the way, expect to buy a bigger pony each year.
Bottom line. If you own a universal life policy and don’t have a current “guaranteed in force illustration” showing you what’s really hiding under your bed, call the company and ask for a guaranteed in force illustration immediately and then have it reviewed by someone other than the agent who sold it. An independent agent or your accountant are good places to start. Even if you bought it from an independent agent, find a different one to review it.