Why Are My Universal Life Insurance Premiums Skyrocketing?

Green Settlements Staff

Life insurance certainly has its perks: security, protection and a financially stable future for your loved ones. But all this stability comes at a price, and that price has been steadily climbing for some policyholders for many years. When premiums spike, it can put additional strain on seniors who may already struggle to make their monthly payments.

Several factors contribute to this trend, including changes that have swept the life insurance industry over the past few decades. Seniors who bought their life policies during the 1980s and 1990s are starting to see this shift firsthand as costs rise despite initial promises of guaranteed returns on their investments.

These policyholders are feeling the pinch through no fault of their own; in fact, many insurance companies told their clients they’d enjoy a 4 percent return after purchasing their universal life policy. What insurers weren’t prepared for, however, was a drop in interest rates. As these rates continue to shrink, insurers across the board are suffering losses that make it difficult for them to actually deliver on their initial claims.

As a result, premiums for universal life policyholders have increased dramatically—for some seniors, this means hundreds, or even thousands, of dollars have been tacked on to their monthly bill. With many policyholders already on a fixed income, increases this steep are simply not sustainable.

So, what does this mean for you and your long-term life policy?

You could do what many policyholders feel compelled to do and surrender your plan back to your insurer. This may seem like a good idea for those desperate to ditch their costly monthly payments; however, the insurance company has the upper hand in that scenario. Not only have they been collecting premium payments from you for years, but when you surrender your policy or let it lapse, your beneficiaries will not receive the death benefit because your insurer is no longer bound by the terms of your policy.

One option for seniors who want to alleviate the burden of premium payments without losing out on the value their policy holds is to pursue their options on the secondary life settlement market. A life settlement can offer competitive prices that reflect the true value of your policy, allowing you to get more than your insurance company would offer for the same plan.

If you are at least 65 years old and own a life insurance policy with a face value of $100,000 or more, you could qualify for a life settlement. It’s important to note that universal policies are not the only types that qualify—term and whole policyholders could be eligible for a life settlement, too, so be sure to explore all your options before making a decision that will impact your financial future.

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