Note: This article is courtesy of Iris.xyz
By Michael Freedman
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This isn’t some new Law and Order series, unfortunately. This is real life.
Over the past year, at least seven big life insurance companies have raised premiums on a range of Universal Life Insurance policies, many of them targeting increases on seniors. From this, the headlines have ensued:
Retirees Stung by Universal Life Costs – The Wall Street Journal (August 10, 2015)
Surprise: Your Life-Insurance Rates are Going Up – The Wall Street Journal(December 4, 2015)
Life Insurers Pass Pain of Low Rates on to Consumers – The Wall Street Journal(March 20, 2016)
Rising Premiums for Universal Life Insurance Draw Scrutiny – The New York Times(May 20, 2016)
Why Some Life Insurance Premiums are Skyrocketing – The New York Times (August 13, 2016)
The news stories provide some compelling – heartbreaking, even – “ripped from the headlines” stories:
- A retired social worker had been paying $700 a year for his Universal Life policy ever since the 1980s. Last year, he received notice that his premium had risen to $6,000 a year. Unable to pay the new rate, he canceled the policy and took a job to supplement his income—at 71 years old.
- When a retired couple’s life insurance bill nearly doubled, they were forced to drop their policy, simply walking away from a policy on which they’d paid $55,000 in premiums over the past 25 years. The return on their investment: the $4,100 in cash that remained in the account.
- A couple, ages 62 and 57, who are both still working, just saw a 40 percent rise in their premiums. They are now cutting back on spending and expecting to work longer to achieve their retirement goals. “You think you’re doing the right thing, and it goes up in smoke,” they said.
“It does not take much imagination to imagine that millions of UL policyholders will be adversely affected if insurers are free to raise rates,” according to James H. Hunt of the Consumer Federation of America, which has called on state regulators to investigate these questionable rate increases. One policyholder decried that insurers should “bite the bullet” because they have historically profited with other people’s money, arguing that carriers should “tighten their belt” rather than seek more revenue and returns from existing policyowners.
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