Your life insurance premiums got too expensive
When the cost of keeping a policy outweighs the benefit, most people let it lapse. There may be a better option.
Universal life and indexed universal life policies issued in the 1990s and 2000s were often illustrated with interest rate assumptions that have not materialized. As a result, many policyholders are now facing premium increases they did not anticipate — sometimes doubling or tripling within a few years. When the policy is no longer affordable, the default is to stop paying and lose everything. But if the policy meets certain criteria, it may be worth more than nothing on the secondary market.
Why premiums increase on universal life policies
Universal life policies have a cost of insurance that rises with age. When the policy's internal account value is depleted — because credited interest rates came in below the original illustration — the policyholder must pay higher out-of-pocket premiums to keep the policy in force. Many policyholders received in-force illustrations showing the policy lapsing within a few years unless premiums are substantially increased.
What happens if you stop paying
If you stop paying premiums, the policy will lapse once the account value is exhausted. At that point, the coverage ends and you receive nothing. If the policy has a cash surrender value, you can surrender it before it lapses and receive that amount — but the surrender value on a depleted universal life policy is often very small.
What a life settlement offers instead
A buyer in the secondary market is not looking at the cash surrender value. They are looking at the death benefit and the insured's life expectancy. If the insured is 65 or older and the face amount is $100,000 or more, buyers may pay significantly more than the surrender value — even on a policy with a depleted account value. The buyer takes over the premium payments going forward.
The timing matters
A policy that has already lapsed cannot be sold. The window to explore a life settlement closes when the policy terminates. If you have received a notice of lapse or a premium increase you cannot sustain, the time to find out whether the policy has secondary market value is now, not after the grace period expires.
The grace period is the deadline.
Once a policy lapses, the option to sell it disappears. If you are facing a premium increase or a lapse notice, call us before the grace period runs out.
Find out what the policy is worth before it lapses.
One short conversation tells you whether the policy qualifies and what the realistic range of proceeds looks like.