Hard to believe, but it's been almost a decade since we first wrote about the tricks and travails of Universal Life:
"The problem is, for the past 10 or 15 years, this has not been the case, and the policies are beginning to “blow up.” That’s insurespeak for lose value, and threaten to lapse."
Yesterday's Wall Street Journal had a pretty decent article pointing out how these plans have begun biting retirees in the tush, offering a fairly balanced take:
"The buyer deposits money into the policy. The insurer deducts for expenses, including the cost of the death benefit, and the rest of the money stays in the policy earning interest to help pay some, or all, of the future costs"
So far, so good.
The article then goes on to point out some of the flaws in how the plans were both constructed and sold, and why they've begun blowing up. The problem is that it completely absolves the policyholder from any responsibility. That is, it seems to lay the blame for this self-destruction primarily at the feet of agents (and, to some extent carriers).
Now, it's undeniable that agents also bought into the idea that interest rates would always go up (as had been historically true for many years). And I have no doubt that unscrupulous colleagues may have been less than forthright in their presentations (which is not to let the carriers off the hook).
But missing from the article is any real sense that the clients themselves, with actual skin (ie money) in the game had any responsibility for their plans' success (or lack thereof). All UL's come with annual reports, which show how well (or poorly) the plan is faring.
But Henry, you may object, I don't understand those reports.
Fair enough (for maybe the first few), but then why wouldn't you call your agent to ask for an explanation?
And along those lines, the article castigates carriers for failing to notify insureds when policies go "upside down." Why is it this the insurer's obligation? For all they know, the insured wants the policy to run out. And exactly how would the insurer, who has zero ability to force policy owners to make premium payments (let a,lone increase them) determine the appropriate time for such notification?
What ever happened to personal responsibility?
Which is not to say that it's not crossed my own mind: in fact, I've had this discussion more than once with the rep for my primary life carrier, and one of the problems we've yet to resolve is how does an insurer determine the "right" time to make this notification? And what resources would be necessary to even begin to red flag individual policies over many years?
Best advice? Read your annual reports, and don't be afraid to ask questions about them.
"The problem is, for the past 10 or 15 years, this has not been the case, and the policies are beginning to “blow up.” That’s insurespeak for lose value, and threaten to lapse."
Yesterday's Wall Street Journal had a pretty decent article pointing out how these plans have begun biting retirees in the tush, offering a fairly balanced take:
"The buyer deposits money into the policy. The insurer deducts for expenses, including the cost of the death benefit, and the rest of the money stays in the policy earning interest to help pay some, or all, of the future costs"
So far, so good.
The article then goes on to point out some of the flaws in how the plans were both constructed and sold, and why they've begun blowing up. The problem is that it completely absolves the policyholder from any responsibility. That is, it seems to lay the blame for this self-destruction primarily at the feet of agents (and, to some extent carriers).
Now, it's undeniable that agents also bought into the idea that interest rates would always go up (as had been historically true for many years). And I have no doubt that unscrupulous colleagues may have been less than forthright in their presentations (which is not to let the carriers off the hook).
But missing from the article is any real sense that the clients themselves, with actual skin (ie money) in the game had any responsibility for their plans' success (or lack thereof). All UL's come with annual reports, which show how well (or poorly) the plan is faring.
But Henry, you may object, I don't understand those reports.
Fair enough (for maybe the first few), but then why wouldn't you call your agent to ask for an explanation?
And along those lines, the article castigates carriers for failing to notify insureds when policies go "upside down." Why is it this the insurer's obligation? For all they know, the insured wants the policy to run out. And exactly how would the insurer, who has zero ability to force policy owners to make premium payments (let a,lone increase them) determine the appropriate time for such notification?
What ever happened to personal responsibility?
Which is not to say that it's not crossed my own mind: in fact, I've had this discussion more than once with the rep for my primary life carrier, and one of the problems we've yet to resolve is how does an insurer determine the "right" time to make this notification? And what resources would be necessary to even begin to red flag individual policies over many years?
Best advice? Read your annual reports, and don't be afraid to ask questions about them.
[Hat Tip: FoIB Joe B]
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