It’s a morbid thought but a reality for many people. If you currently have life insurance that is serving an important financial goal, then this article should be eye opening.
Two recent articles:
Wall Street Journal “Draining Away” Read Article
WealthManagement.com “The Impact of Rising Cost on Non-Guaranteed Life Insurance” Read Article
I have brought this concern to the attention of consumers. The problem stems from the type of permanent life insurance sold over the last 20-25 years. It is called Universal Life which is a performance-based contract. Meaning policy performance is based on a rate of return either an interest rate, stock market index, or sub-account performance which operates like a mutual fund.
When you initially bought the policy an assumed rate of return was used to establish your premium. If your policy has not received the assumed rate over the years you have been under funding your policy.
There is another reason for this problem of underfunded policies and that is increased expenses. Many life insurance companies have increased the internal expenses in the policies themselves.
Universal Life is a good form of permanent insurance however it must be monitored for performance just like you would manage a retirement fund or other investment goal.
This highlights the last issue which is most consumers buy life insurance stick it in a drawer and never review it. It’s not just the fault of the consumer because most insurance agents never review policy performance for a variety of reasons.
The good news is if you have an underfunded policy you do have options. The mortality costs of life insurance have continuously come down over the last 25 years and new product design can guarantee this doesn’t happen in the future.
If you have life insurance that’s important to your financial plan or if you are not sure if you still need the life insurance, you have I urge you to make an appointment with your financial advisor for a full review of your policies.
Don’t let your life insurance expire before you need it!