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TDI: Monitor Universal Life Insurance Policies

The Texas Department of Insurance is reminding consumers with universal life insurance policies to check in with their agents every year – before they face the difficult decision of paying far more or dropping the policy.

“Talk to your agent now and ask how your policy is doing,” said Texas Insurance Commissioner Kent Sullivan. “Don’t wait for a problem.”

Problems can arise when interest rates are low and don’t add to the policy’s account as expected when the policy was purchased.

Universal life policies make up 42 percent of the national life insurance market in terms of premiums. The policies have flexible payments, but the policyholder must pay enough to keep a positive cash account. Payments are added to the policy’s account, which also grows with interest and investment returns.

The insurer deducts the cost of the life insurance coverage and fees from the policy’s account. And as the policyholder ages, the cost of the life insurance coverage increases.

TDI encourages consumers to talk to their agents about their universal life policies annually. Make sure to ask:

  • How much is in the account? Is the amount decreasing?
  • What interest rate is the account earning?
  • How much is being deducted for the insurance coverage and fees? How much is this expected to increase in the future?
  • How long will the account have a positive balance based on current payments? Do payments need to be increased?

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