Escalating Premiums on Universal Life
I originally (52 years ago) bought a $10,000 whole life policy from the then Mutual Benefit Life. Eventually, because of bad investments in commercial real estate, it went into receivership. Anchor took it over.
Prior to that, a representative for Mutual Benefit convinced me that I should let him change my policy into one that would give me a higher face value, and let the cash value help pay the premiums. For six or eight years I had no premiums to pay. Then, in 1996, a monthly premium of $20 some dollars, later $48. Now... for 2008, the premium will be $127, and it goes out of sight for the next five years.
A representative on phone, told me the policy I have is a Universal Life policy, and it was a mistake to have gotten that. I can't change it with them for a whole life, but he suggested that I could with a different company.
The face value is $22,500, and the cash value is about $10,800. What are my options? Can I cash in the policy and get the cash value. If so, I will put it in a CD, or whatever to cover my burial expenses. Or, if I can, exchange it for a different kind of insurance with modest premiums. I would be interested in that. I only need about $10-15,000 to cover funeral expenses. I am 78 years old, a widower, and in relatively good health. Your suggestions wil be much appreciated.
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posted by Jeffrey D. Voudrie @ 8:00 PM
2 comments
2 Comments:
That is one of the problems with universal life insurance policies. People are quoted hypothetical rates that show the policy earning enough to cover the cost of premiums after X number of years.
Most people don't understand that they are hypothetical. It's not unusual for those illustrations to not "pan out" and the owner is left having to cough up more money.
You are in a situation where it will be quite expensive to get another policy. You can surrender the policy and take the cash surrender value and put it in a CD.
It is worth checking whole life rates at various companies so you can make an informed decision.
Thank you very much for your very helpful reply.
While waiting for your reply, I contacted the present insurance company again. I found out the exact current cash value. Because it was slightly less than the projected value it appeared as though if I did surrender the policy they would have to file a Form 1099 to the IRS, but I would not have to pay income tax on the amount.
I also discovered that AARP with whom I have my Med-igap and Medicare D insurance, has two forms of whole life, available to members up to age 80 (I am 78), one of which I would definitely qualify for (and at a reasonable price). The other I would very probably qualify for.
Having received the advice of a true professional, I definitely have a course of action to pursue. And, if worst came to worst, and I could find no company willing to insure me, then I would put the money in a CD, and forget about it, and it should be more than enough to bury me, unless I live far too long. Again, thank you.
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