Do the premium rates on Universal Life policies remain constant as we age?

Posted in Life Insurance Questions over 2 years ago, 1 reply

I have had a universal life policy for many years. I have been told by my insurance agent that the cash value is close to 10K at present. He suggested I cash it in and purchase a whole life policy because as I get older, (I am 67) the cost of the monthly premium will increase and eat up the cash value until it is gone. I am very upset about this news. I was under the impression that The premium rates and coverage provided by universal life policies remain constant throughout the years. I found the folowing information on an insurance Q&A site regarding Universal Premiums:
Premium rates tend to be higher than with other policies, largely due to agent commissions, but under some plans the rates drop as the policyholder ages and may even disappear altogether. Unless the policy lapses, there are no renewal fees to contend with.
How can I find out if my Met Life Universal policy is a plan where my premiums increase or decrease or stay constant as I get older??

submitted by Elaine Chapman in Pennsylvania

The agent was telling you the truth. Most times, people do not see the increase in premium due to part of the cash value being used to pay for the premium. As you get older, the cost of insurance goes up as well. It is different with a Whole Life product because although you do pay a bit more and up front you rarely see a good start in cash value (partly to pay for the cost of insurance) a true whole life policy from a mutual company offers dividends which can be used to increase the cash value as well as the overall benefit.

Also, I wouldn't say that agent commissions are the reason why insurance is as expensive as it is. Depending on the company you go with it, it comes down to how they also run their business. A mutual company is a company that is owned by it's policy holders, so they get a dividend when the company does well, on the other spectrum we have stock based companies who owe their bottom line to the share holders. There are many factors that go into what makes insurance cost what it does, some companies are very good and offer fantastic products due to good underwriting, other companies not so good and have alot of pay outs, but to say it's all because of an agents commission is very misleading.

submitted by Brian Todd in Livermore, CA @ September 22, 2009 - 03:19 PM

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