What is an Exploding Universal Life Insurance Policy?
Is your old universal life insurance policy exploding? What does this mean? First, we must understand that a universal life policy is a type of permanent insurance. Most universal life insurance policies accumulate cash value and provide protection for the policyholder’s family if he or she were to pass away.
The universal life insurance policy’s performance fluctuates, as it is based on the insurance rates and cost of insurance. Both of these can change over the life of the policy. What happened with many policyholders who purchased in the 1980’s, is that the interest rates at that time were very high. The policies performance was based on these high rates. When the interest rates went down, the policies were not earning what they had projected to, so policyholders needed to pay more to maintain their policies. An exploding policy was more common with the universal life insurance policies that were issued in the 1980’s, due to the swing in interest rates.
Other factors that can cause the exploding universal life insurance policy could be when loans are taken on the policy or if the policyholder skips payments or makes late payments. This could also cause more premiums to be needed to keep the policy going.
With the new universal life products that are out there now, policy projections are not made with such high interest rates and there are riders that help keep the policy from lapsing. These are riders such as no-lapse guarantees, or death benefit rider and coverage continuation riders.
There are a lot of options available to you with life insurance, which can be confusing to navigate through. So give us a call at 1-800-651-1953. I would also be happy to assist you with determining if it would be best to look into one of the new universal life policies or our whole life or term insurance products. Whichever might fit your needs, I am here to help you! Remember you can get a free life insurance quote on Pivot.com too.
About the author: Pam Fortier has been in the life insurance business for over 30 years. She also holds both a LUTCF designation and a CISR designation. Pam is adept at helping clients select the coverage they want at the price they can afford. You can contact Pam at 1-800-651-1953 or PFortier@Pivot.com.