Tactics of Universal Life Insurance Companies
When researching what Universal or Whole Life Insurance policies would be best for you, many companies deliver claims regarding the effectiveness of Universal Life Insurance products that may seem too good to be true. If you’re getting the sense that your life insurance policy is too good to be true, you’re most likely correct. Always do your research on the product that you are thinking about purchasing before executing the transaction.
Deceitful Wording In Marketing
Insurance companies entice individuals into Universal Life Insurance policies on the basis that their client’s investment in a policy with the said company will be guaranteed and result in a lifetime of benefits. Some of the top competitors entice potential customers by wording their claims to be just truthful enough, yet still hiding the uncertainty within their policies.
Below are some examples,
Claim: “Premium payments limited to 10, 15, or 20 years.”
Truth: Unlike in previously projected models, interest rates have lowered, which has resulted in a lower dividend to the policyholder or lower return on their investment than the insurance company forecasted. As a result, policyholders might find themselves in a position where they must pay higher premiums for a longer period of time, in order to receive the applied for death benefit.
Claim: “Cash values can be accessed during the insured’s lifetime.”
Truth: Yes, the cash values, in the form of a loan can be accessed at any time, but like all things, it comes with a price. The interest rates on the loans can be difficult to pay off, increasing the likelihood of a policy to lapse. In addition, the loan value coupled with the interest may lower the contract’s death benefit, regardless of how long you have been paying your premiums.
Claim: Guaranteed cash value grows tax-deferred.
Truth: Yes, in most cases, Universal Life Insurance policies are tax-deferred. What is deceiving is if the wording contains the “guaranteed cash value,” term and how the company’s do not represent that a portion of the dividends of the policy are dependent on interest rates. The only way to have your money be backed by the full faith and credit, it needs to be FDIC insured, which insurance policies are not. Again, the clever wording adds a sense of assurance that misrepresents their capabilities.
Claim: Locking in your premiums now secures protection.
Truth: Companies carefully word their contracts so that the policyholder bears the risk of loss, not the companies selling the products. According to Forbes, the fine print in many policies allows for the devastating results of “Universal life policies allow companies to raise premiums or siphon off cash values if they can’t make enough from investments to meet their costs and still earn a profit.”
When To Contact An Advisor
The time is now to contact an advisor who is aware of the crisis regarding Universal Life Insurance policies. s. If your family member is dependant upon your income, your retirement planning is invested in these policies, or you rely on the policy to cover funeral expenses you should especially contact an advisor sooner rather than later. By deciding what to do with your policy now, and whether it is a good investment based on your contract and personal situation, you can ultimately shape your financial future for years to come.