Some Universal Life Holders Face a Conundrum
Many holders of universal-life insurance bought their policies years ago, at a time when interest rates were high. Today, many of these policyholders will have to pay more or face cancellation, according to news reports.
To understand why, you have to understand that we’re talking about permanent life insurance. Unlike term life insurance, this insurance type doesn’t limit the time period for payout: It stays in effect for the policyholder’s life.
Categories of permanent life insurance
Permanent life insurance is subdivided into two categories. Under the permanent life umbrella is whole life insurance, which generally charges set premiums, and universal life insurance, which generally comes with flexible premiums.
Universal life insurance holders often use the cash value of their policies to pay for the policy’s future costs. Now, that’s become a problem, given the low level of interest rates.
Because interest rates are so low, the cash value of many life insurance policies is rising at a rate that is less than expected.
Policyholders facing a conundrum.
As a result, many policyholders who depended on that cash value to pay the policy’s premium can’t afford to do so. The worst case scenario is that the policy, then, could be cancelled.
Those at risk are primarily consumers who bought life insurance policies before interest rates fell sharply in 2008 – and that could be a lot of people. Industry association Limra has said that, in 2008, the percentage of life-insurance premiums from universal policies totaled 40 percent.
If you’re in this predicament and interest rates stay low, you can opt to pay the premiums yourself rather than out of the cash value. Or you could accept a lower payout or abandon the policy.
Steps can mitigate the impact
However, there are some steps you can take to salvage at least part of your coverage. Discuss your options with your advisor.
Health Insurance Exchanges: What’s Happening?
As part of the health insurance reform package under the Affordable Care Act (ACA), each state was to create its own online marketplace (Health Insurance Exchange) to connect consumers to health insurance products.
The idea was to allow insurance carriers to compete on a level playing field, to facilitate the comparison of plans, and to make it easy for individuals to obtain coverage.
The deadline for online exchanges to become operational and begin to accept enrollees for their 2014 plans is coming up fast: The law requires them to start enrolling in October, 2013 – and that’s proving to be more difficult than expected.
To date, only 17 states, plus the District of Columbia, have thus far committed to setting up their own plans. The remaining states have elected to have the federal government set up their exchanges for them. It’s harder than it sounds.
While securities – such as stocks, bonds and mutual funds – are regulated at the federal level, insurance contracts have a long tradition of state-by-state regulation.
As a result, each state has its own diverse set of insurance laws and regulations, with different procedures for rate-setting, different mandated insurance coverages, and different licensing and authorization for carriers and agents.
Therefore, the US Department of Health and Human Services cannot create a one-size-fits-all website. Every exchange has to be customized to conform to each state’s unique set of laws and regulations.
As a result, both the federal government and the states are becoming concerned about the ACA timelines.
According to a recent report, some states have begun to approach federal officials for extensions; however, at press time it appeared the October 2013 deadlines were firm.
It’s critical to be up on what’s happening in this area: To ensure you have the most current information, discuss this and other health insurance issues with your insurance advisor.
Recipe: Greek Shrimp with Feta
- 2 tablespoons olive oil
- 1 cup chopped yellow onion
- 1/4 teaspoon red pepper flakes, or more to taste
- 2 1/4 cups chopped peeled ripe tomatoes
- Salt and pepper to taste
- 1 1/2 pounds uncooked frozen shrimp, thawed
- 4 ounces good-quality feta cheese, crumbled
- 1 tablespoon chopped parsley
Preheat broiler. On a burner, heat olive oil in an ovenproof skillet and add onions and pepper flakes.
Stir often until soft – about five minutes – and then add tomatoes and season to taste with salt and ground pepper. Lower heat and simmer sauce until slightly thickened.
Place shrimp in one layer in the skillet and spoon some sauce on top.
Scatter the feta on top and transfer to broiler briefly until cheese begins to melt.
Remove, sprinkle dish with parsley. serve.