Losing Insurance Due to Insufficient Funds

Q: I recently reviewed my universal life policy and found that by 2024 I will have no insurance left, due to poor return on their investments and their charges to manage my policy. This is after paying on this policy for 20 years.

Even though I was a smoker when I took it out in 1988, and still smoke now, the difference in premiums for a new policy, whether term or whole life, is more than I can justify. Do you have any suggestions?

I am 57 years old, and have no health problems. Or would I be better off... taking the cash value and putting it in a cd? Until recently, I thought when the company said that my policy would be in effect until 2024, that I would not have to pay on it anymore, and not that it would be lapsed due to insufficent funds.

Thanks for the information in your article.

A: Unfortunately, your situation is not unique. Few realize that the projections used when selling these policies are hypothetical and that the policy will work quite differently if the projections aren't reached.

You have to determine whether you still have a need for insurance. If you do, you need to see how much you will have to pay each year to keep the current one in force--using very conservative interest rate projections. Compare that to the cost of other policies and decided.

If you don't need the insurance, then you can surrender it and use the cash value. Based on how much you've paid it, all/portion of it may be taxable.

Your posted comments on this and other questions are welcome.
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