Who Would Raise Life Insurance Rates More Than 50%?

The answer that pops into our head in the super competitive life insurance market is a company that doesn’t want to sell any more life insurance, or more specifically in this case doesn’t want people to buy any more of one product until they can get it off the market. Genworth Life and Annuity, formerly First Colony has found themselves holding a term life insurance conversion product that they claim is losing them money big time. Their remedy is to replace it with a similar product that is more than twice the price, in some cases over a 60% increase. This is only applicable to the Colony series term life insurance products.

I have a First Colony policy and I would just like to share with you a condensed version of what they say about exchanging or converting the term policy I have.

“This policy may be exchanged for a new policy on or before February 22, 2019. Evidence of insurability is not required. The exchange this policy the Owner must provide the following to the home office, 1. Written request for exchange and 2. This policy.

The policy date of the new policy will be the date of the exchange. The date of exchange is the beginning of the policy month on which the exchange is effective. The new policy may be on any whole life or endowment plan available for this purpose on the date of exchange with a premium per $1000 higher than the premium per $1000 for this Policy as of the date of exchange.

Using the rates in effect for the new policy on the date of exchange, the company will determine the premiums for the new policy using the following, 1. the Insured’s sex and age nearest birthday on the date of exchange and 2. the premium classification of the new policy. The new policy will have the same premium classification as this Policy.”

Genworth officially announced yesterday that they will be changing (raising) the rates in effect effective on September 3, 2014. Note #1 in the first paragraph of the exchange say the company must receive a written request for exchange. This is actually a form and if it is not in the home office by September 2 the rates in effect on September 3 are the new reality. From Genworth’s release to agents yesterday I can actually get an idea exactly how this will impact me. I have a $500,000 policy and was approved at their preferred best rate. If I convert that $500,000 prior to the rates now available my policy would change from a term that ends in 2019 to a universal life guaranteed to to age 121 with a level premium and death benefit and the premium would be just about $6000 a year. If I wait until the rates change my cost will be just shy of $14,500 a year. Keep in mind that these are the rates I will pay until I die and with my current health that is likely to be a long time. Also keep in mind that I don’t have to convert all of my First Colony policy. In fact my wife and I both have policies and both plan to convert just $100,000. The other $400,000 will remain as term until 2019.

We understand that stating these kind of things about rate increases is walking a fine line between what some would see as valuable information and most would see as a high pressure sales technique due to the short availability period. Understand that we didn’t make that period short. This is what life insurance companies do when they don’t want to be accused of not giving fair warning, but do want to avoid long exposure to sales of a product they fell they are losing money on. If they gave, say, six months warning, agents like us would put out giant press releases in all of the big financial news outlets. And in fairness to them, they at least gave warning. Other companies aren’t that gracious.

If you have questions or would like to see what your Genworth or First Colony term life insurance conversion options are, call or email. We can help.

About the Author

Every year millions are needlessly declined for life insurance or approved and paying far more than they need to. For 14 years, I have specialized in turning those situations around and finding the right life insurance solution at affordable rates. I give every client the personal attention they deserve.

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