Universal Life Insurance Cost Increase Draws Lawsuit from Policyholders

In 2016, insurance companies announced that policyholders would see an increase in universal life insurance costs in 2017. Some consumers are now calling foul, saying the rate increases are unfair.

Most policyholders bought their insurance many years ago. Now that the policyholders are decades older, their chance of finding affordable alternative coverage is slim.

Lincoln Financial Insurance is one company that saw universal life insurance cost increase by 100 percent. This major jump in premiums affected 25,000 consumers who hold policies issued by Jefferson Pilot Life from 1999 through 2007.

The affected policies are known as “Legend Series” policies and include the JP Legend 300, JP Legend 200 and JP Legend 100 Flexible Premium Adjustable Life Insurance policies.

Universal life insurance policies differ from term life insurance policies. Universal life insurance can last for a policyholder’s life and were sold with a guaranteed interest rate. Some policyholders saw their universal life insurance policy as a way to build a nest egg they could cash out upon retirement. In contrast, term policies have fixed costs and fixed benefits.

Universal life insurance cost was attractive in the 1980s and 1990s when interest rates were higher. Now that interest rates have remained relatively low for the last decade or so, insurance companies fear they are losing money on such policies.

According to an article in The New York Times, the Consumer Federation of America asked the National Association of Insurance Commissioners to look into the rate increases. They question whether the rate hikes, which range from 38 to more than 100 percent, are justified or if the insurance companies are simply trying to appease shareholders at the expense of policyholders.

Lawsuit Filed over Universal Life Insurance Cost Increases

Transamerica Life Insurance Co. is just one company facing a lawsuit regarding the increase of universal life insurance costs.

The policyholders allege the price hikes amount to a breach of obligations held under the policies. Transamerica argues it just needs to prepare for future forecasted costs to provide coverage.

Policyholders who do not wish to pay the higher premium can opt for a different policy, allow the policy to lapse, or reduce the death benefit. If policyholders allow their policies to lapse, the insurance companies will most likely benefit because they will have collected premiums for decades, but will not need to pay out anything.

While policyholders have seen their monthly life insurance payments rise in smaller increments previously, these new increases of up to more than 100 percent are not as easily absorbed in the family budget.

If you have seen your universal life insurance policy cost increase with Lincoln Financial Insurance or another insurance company, you may be eligible to join a class action lawsuit.

Join a Free Universal Life Insurance Class Action Lawsuit Investigation

If you purchased a universal life insurance policy through Lincoln Financial Insurance or another insurance company, you may qualify to join a FREE class action lawsuit investigation and pursue compensation.

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