Surprise – Your Life Insurance Costs Going UP!


Major insurers are breaking a long-standing industry taboo of raising rates on life-insurance policies they sold to consumers years ago, in the latest fallout from a prolonged stretch of low interest rates.
In recent months, several insurers have notified tens of thousands of people who own a type of coverage known as “universal life” that they are exercising little-used contractual rights to raise costs.
Universal-life policies combine a death benefit with a tax-advantaged savings account. Since the 1980s they have accounted for at least a quarter of all new individual life-insurance sales, and more than a third over the past decade.
The latest moves mean that more people in their 70s and 80s are facing higher annual charges for life insurance they bought as far back as the 1980s. And this could be just the beginning: Industry consultants expect other insurers to follow suit, which could mean higher annual costs for potentially millions of Americans holding various types of insurance.
“If interest rates stay low for another three or four years, all bets are off as to how many follow,” said Lawrence Rybka, president of ValMark Securities, an insurance and brokerage firm in Akron, Ohio.

Depending on the insurer, the extra annual cost ranges from about $150 for people with $250,000 policies to six-figure sums for those whose coverage tops $10 million, financial advisers say. The increases, which relate to the annual charge for the death benefit, stretch from the mid-single digits to above 200% in some instances, according to ITM/TwentyFirst, which provides policy-management services to trustees and institutional clients.

Wall Street Journal 12/04/2015

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