Life Insurance COI Increases May Mean Loss of Policies

Those who hold universal life insurance policies expect that the value of their policy will go up over time. However, with the new life insurance COI increases, many policyholders are having trouble keeping their policies.

There are several different types of life insurance policies. Two of the main types are term life insurance and universal life insurance. Term life insurance is the more popular, less expensive type of life insurance policy. Term life insurance is offered for a “term,” or a length of time, and it pays benefits if a person dies within the term of the policy.

Universal life insurance also pays a death benefit, but is considered an investment for the policyholder and accumulates a cash value.

Last year, many large insurance companies made announcements that there would be universal life insurance COI increases. COI refers to the cost of insurance, a sum that the insurer deducts from the value of the insured person’s policy.

These COI rates can change based on mortality rates and interest rates. The universal life insurance COI increases are usually negligible, but there has been concern over the announcement of large insurance COI increases recently. Many are calling these increases unfair and wondering if insurance companies are instituting increases to satisfy investors, rather than cover legitimate costs.

Some of these universal life insurance COI increases have been reported to be as high as 70% to 100%. One major insurance carrier that instituted universal life insurance COI increases was Lincoln Financial. These increases affected over 25,000 policyholders who bought Jefferson Pilot Life policies from 1999 to 2007.

What this means for policyholders is that individuals who have been paying universal life insurance premiums for years while assuming that these premiums would be adding to the cash value of their policies, may not be able to continue paying their premiums.

Lincoln is only the most recent of large insurance carriers to see large life insurance COI increases. They have followed companies like Transamerica, Voya and Banner. Because many policyholders can no longer afford to pay for their universal life insurance, many policies have lapsed and customers cannot continue paying for their coverage.

Many of these affected individuals are over the age of seventy. At this age, it is near impossible to acquire a new policy that is in any way affordable. Medical conditions, age, and costs of replacement policies can interfere with a customer’s ability to acquire a new life insurance policy.

Allegedly, low interest rates have contributed to the life insurance COI increases. Because low interest rates have affected life insurance policy portfolios negatively, the value of portfolios has fallen. Critics claim that insurance carriers are increasing the cost of insurance for policyholders to, at best, secure their bottom line, and at worst, encourage policyholders  to let their policies lapse.

Regardless of the intention of large insurance companies, many older Americans are finding themselves without the insurance coverage they thought they had and without the investment they have contributing to for many years.

Those who have been forced to lapse on their universal policies due to life insurance COI increases will lose all the money that they have saved for the last couple of decades.

If you believe you have been the victim of unfair universal life insurance COI increases, you may benefit from speaking to an experienced attorney.

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