Don’t you just hate it when someone, anyone, lies to you for any reason? As the DOW plunges again today I’m sure one of the two biggest financial lies is running through a lot of minds, “It always comes back”. It’s just our opinion that in the whole scheme of things, while that seems to have held true over the history of the stock market, saying that it will always come back is making an assumption that at some point may not hold.
Which leads us, because we’re in the life insurance business, to what we believe is the biggest financial lie, a lie that has already ruined the life insurance portfolios of millions and is a festering wound on the financial plans of everyone who has purchased a traditional universal life insurance policy, a variable universal life policy or it’s new cousin, the indexed universal life policy. The primary lie is that your policy is guaranteed for life. Easy enough to believe because in the beginning and at the heart of the concept of universal life is the claim that it is a permanent policy. Something about the word permanent just lends itself to the assumption of, well, permanence.
The secondary lie about traditional and indexed universal life policies is that they are going to make you tons of money, so much money that they should be considered a tool for retirement, a golden egg. Those lies, permanence and tons of money, may have been true of the older policies and could be true of the newer indexed policies, if, and only if, we had at the core of our economy a stock market that never hiccupped and wasn’t prone to international nonsense.
You’ve heard all of this before and it may be one of those things we keep repeating until the last universal life policy implodes, but a call we got over the weekend just drove home again how damaging the false hopes that lying life insurance agents gave when they said, “it’s guaranteed to age 100 or it’s guaranteed for life”. A client called who who has a universal life policy that he has owned for over 20 years. He has never missed a premium payment or even been late with one since his policy has been on an automatic bank draft. When he was sold the policy he was told that if he paid an extra amount monthly the policy would be guaranteed for life and he opted for that. He just got notice that his monthly premiums will be be increasing to $150 a month, a 50% increase, in this next policy year and that it would be going up again next year. The same thing is happening to his wife’s identical policy.
They were in their 30’s when they took out the life insurance policies out and now, over age 50, both have health issues that would make it very expensive to replace the nosediving UL’s they own. They had counted on these policies as final expense policies that would cost $100 a month for each for life and would never change. They had also been told that the policies would build cash value, but they noticed that wasn’t going well several years ago and had written that off, putting the remainder of their faith in the “extra charge for the lifetime guarantee”. Now that the life time guarantee in traditional and indexed universal life is sinking like a rock they recognize they don’t have anything and that unless they were to die much sooner than expected, they will soon have to lapse the policies as too expensive.
Bottom line. A couple of important points. 1. Serious annual reviews of your life insurance can stop the down turn when it first shows on the horizon, and 2. a no lapse guarantee universal life requires nothing more than on time payments to meet it’s commitment of a lifetime level premium and death benefit. If you have questions or own a dying life insurance policy and want to know your options, call or email us directly. We can help
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