Is my universal life insurance policy good the rest of my life?

Question

I have had a universal life insurance policy for the last 24 years, recently I was contacted by the insurance company and was told that the insurance was going to burn itself out. I have no idea what that means. But the agent that came to my house(from the same company) tried to tell me my policy was worthless and I should get a new one with premiums for at least 2 to 3 times as much per month. The original agent told me my policy would only need to be paid for 30 years and than it would be in full effect with no further payments needed for life. All of which appears to be a lie. Is there any real Good reason to have one of these policies?

Answer 1

All universal life policies are self-destruct plans. What do I mean? While premiums remain flexible, the cost of your insurance increases internally every year. So less and less of your premiums goes toward cash value. For example, lets say you pay $100/year into the policy. In the first year, $20 is used to pay for the insurance and $80 goes toward the cash value (hypothetically speaking since its actually lower than $80 because insurance plans have annual fees). Next year, the cost insurance increases to $22 and $78 goes toward the cash value. Eventually, all your $100 is being used to pay for the insurance and $0 goes toward the cash value. Year after that, your premiums will increase to $110. If you just pay the $100, then the $10 will come out of your cash value. Now the cash value is decreasing and when it runs out, your policy will lapse.

If you don't believe me, check the tables in your policy. Actually, you don't have to believe me, the insurance company already told you the truth. Agents don't particularly like telling the truth because if they did, you won't buy it from them. For me, I love telling the truth because it pisses these agents off. All life agents (most of them anyway) think about is commissions and making the sale. Its great you have life insurance, but you could of found a better life insurance product.

I personally sell term insurance (usually 30 year term) and help clients invest their money 100% of the time. Why? Most people don't have lots of money saved right now, so loss of life can be very devastating to the family. So they need the right amount of protection for the lowest possible cost. As they get older, they would have lower financial obligations and their investments will grow, so the need for life insurance declines.

Did you know if you invested $100/month for next 30 years and your retirement account performs at an average rate of 10%, you can potentially have $228,000? If this was in a Roth IRA, all this money can be withdrawn tax-free after age 59 1/2. Its not guaranteed you will get 10%, but its possible since the mutual funds I offer has a long track record of success and have the best ratings from Morningstar. You had the Universal Life policy for almost 25 years, how much cash value has been built?

Answer 2

First, a universal life policy is basically a term policy with a savings component. If you buy term and save the difference it really shouldn't matter if it is in a universal policy or a term policy and a saving account (or brokerage account). The premiums on the term policy are likely higher than on the charge for life insurance expenses in the universal policy.

When universal policies were first written about thirty years ago, it was during a period of very high inflation and consequently high interest rates. This meant that, if inflation continued unchecked, the earnings rate in the universal policy should be so far above minimum that it should pay for itself easily.

Because they were written against short term rates (a foolish thing for a long term contract), they have had a decade of trivial returns meaning the cash value hasn't kept up with the amount required to keep the policy in force. The rates of the 70's and 80's are probably gone for good.

The agent 24 years ago wasn't telling a lie, the world just didn't end up working out like everyone expected. The difference was a permanent change in government policy regarding inflation. When that changed, the assumptions underlying the policy vanished.

You need to have someone independent look at the policy. None of us can give a valid answer without knowing lots of specifics that should never be on the net. However, as a rule of thumb, old policies cost less than new ones, particularly from the better companies. If you have a CPA do your taxes normally, have them analyze it and compare it to alternative quotes or a fee based financial planner.

Answer 3

Ok so I see so many bad sound bite answers in this question I really want to toss my cookies. But most importantly this is about your policy and situation not everybody who can parrot off every suze orman/ wall street sound bite they have read or heard on the internet.

1st is the policy without current accumulation value or is it going to be in the future? Is that based on the current or guaranteed rate? Did this new agent provide anything in writing?

2nd how is your health today and is it noticeably different than 24 years ago. This will play a huge factor. If your health is significantly worse you may want to see if they have a UL to term conversion option or you may want to do a life settlement on your in force policy but only after you can get new coverage as well. and use the settlement to invest and pay for a new term or UL policy

3rd What is your need in insurance? How much is your corrent policy for? You will not get a truly accurate number without a real evaluation. You can email me and I will help you if you want and if I can be of help you can use me as the agent or I will point you to where you can find the product and solution that fits your needs best.

Remember it depends on your situation. Anybody ho would tell you term is always the best answer or Ul or whole life is always the answer is only guaranteeing they will be wrong at some point and that error may be your future. Would you trust a stock broker who said only invest in tech stocks? What about the physician who always prescribes antibiotics regardless of the symptoms? Or a mortgage broker who only recommended 3 year A R Ms.? In every case if all you have is a hammer, whether teh hammer is term, UL or whatever, then everything starts looking like a nail.

Your policy may be a worst case scenario, it may be repairable as is with a premium adjustment or with a reduction and a replacement of some with term or another vehicle.

Find a good independent agent if you do not wish to use my help and get a review that is right for you not what these primerica/suze orman/ stock jockey parrots would have you believe.

Answer 4

Since no body here knows your premium amount, coverage amount and your premium history all their answers are a bunch of crap. I like the insurance dude whose giving you the answer, buy term and invest the difference. what are you suzzie ormon, or what ever her name is? Universal life (not variable) can be a very useful tool, depending how you want to use the policy for, e.g., savings, or providing life insurance, or both.

There are however BAD insurance agents out there that will show you an illistration with the non guaranteed area being calculated with an assumed interest rate of 15%, I suggest that you get all the material that was given to you at the time of the sale, any illustrations and policy, and go over these with this agent and another one from a different company. Get an explaination of why your policy is crapping out on you. If you don't like the answer, report the agent and insurance company to the insurance commissioner of your state.

Answer 5

it's good for the rest of your life, as long as the premiums get paid.

What the original agent is doing is called "churning". Yes, universal life is crap. Whole life, what he's selling you, is also crap. Variable life - crap. He gets 95% commission the first year, so of COURSE he wants you to switch.

The way universal life works, you pay massive premiums for the first XYZ years, then you HOPE that the interest on your cash value is enough to pay the premiums the REST of your life. In good market years it is, in bad market years it isn't.

Regarding keeping this policy - on the one hand, there's no use throwing good money after bad. On the other hand, try to get yourself a 20 year term life policy, renewable and convertable. If you've developed health problems, or depending on how old you are, you might not be able to get term insurance at a cheaper rate than you have to pay to keep the universal policy.

So my advice is . . . keep paying on the Ulife, and try to get some term quotes from local, independent agents. NOT the slimebucket that's trying to sell you more crap. If for some reason you're not insurable, then keep the universal life policy.

I'm assuming here that you have a need for life insurance - kids to put through college, or a family to support or something like that. If you've got money in the bank and the house is paid off, you might not need any life insurance at all.

Answer 6

Don's answer is only good if you are sure you will live long enough to save up enough to equal the death benefit. When are you going to die? Not sure??? well, then maybe you should keep yourself insured. Each case is different. DO NOT make your final decision based on what you read here! This is too important; find a Certified Financial Planner that you can trust to help you evaluate your needs and goals and find the best strategies to get you there. If you choose to cancel the contract you will have to complete some paperwork.

Answer 7

trash that garbage UL policy. It is a huge ripoff! UL = worst life policies ever for the consumers, best life product for the insurance company!