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Insurance Carrier: Universal Guarantee Life Co
State: Massachussetts

Consumer Complaint:

I asked for an illustration of policy values for a universal variable life policy that is expiring. I wanted to know how much it would cost to keep it in force.

Insurance Expert Answer:

Universal variable life policies should never expire -- until the termination date when the death benefit is paid -- typically age 95, 98 or 100. What can happen is the cost of insurance rate guarantee which impacts the cost of insurance can expire, and the company can charge a higher rate for the mortality risk.

Here's what seems to be going on. Typically, right after underwriting, the risks life insurance companies insure are pretty good risks for the rate charged -- far better than that of all people in the general population for the age as the underwriting process culls the bad risks -- or they would not have issued the policy.

For example, say you were 40 when you bought the policy. Over time, the underwriting effect wears off; 20 years later the pool of once reasonably healthy insureds that was 40 years old is now 60.

The health, and thus the life expectancy of people in that age cohort is not materially better than that of the 60 year old population at large. That former 40 year old who ran marathons and played tennis regularly may now have knee problems and put on 60 pounds; his blood pressure is up 30 points and the meds are no longer keeping the cholesterol count at 175 and the doctor has told him that sunburn produced a melanoma. (The same is true, to a lesser extent after 10 years.)

That's the guy who wants and needs to keep the insurance, assuming his family or business needs the coverage. However, IF the now 60 year old guy was still in good shape, and needed or wanted coverage, his or her best bet would likely NOT be to keep the 20 year old policy and pay the higher rate for renewal (insurance companies know that typically only the most unhealthy do that), but to consider a NEW policy, as if he could still pass underwriting, even with some health conditions, the rate on a new policy could be FAR lower than the renewal rate as remember, he'd now be part of that population cohort that is in far better than average health.

Write a polite letter to the CEO of the company at its home office and say you'd previously called and written to the Company but have not gotten a response, and ask his or her help. Also, check the prospectus which was issued.