Last week, The Wall Street Journal published an article, “Universal Life Insurance, a 1980s Sensation, Has Backfired”. The author dives deeply into the ongoing crisis faced by many aging policyowners: a long decline in interest rates has caused their premiums to rise exponentially.
To summarize the article, a once popular insurance product that promised significant ROI to policyowners is now facing backlash due to unforeseen circumstances such as the 2008 financial crisis in the United States. Universal life policies were designed to function in two ways simultaneously: to provide yearly coverage to the insured that could be renewed annually for a premium amount that exceeds the actual cost of coverage and to build a tax-deferred savings account with what’s left from that premium amount after the coverage cost has been subtracted. All projections of the returns expected in these savings accounts were based on stable, high interest rates. But the interest rates did not maintain the levels necessary to keep premiums low.
Most policyowners who were sold universal life insurance policies were, quite simply, unaware of the possible disastrous outcomes should interest rates not perform as projected at time of purchase. They didn’t know they would need to monitor for any such changes in order for the policy to remain on track.
This is why proactive policy management tools, like Proformex, are so important. Leveraging automation through technology to help monitor for unexpected changes can better prepare policyowners to make more informed decisions when their policy needs some attention. Proformex monitors for such changes and alerts you when something doesn’t seem right. It can also provide you with potential alternatives should you decide your policy will become too costly to support or that you simply don’t need the coverage anymore.
Had some of these policies been managed by Proformex, perhaps the policyowners would have been able to make appropriate adjustments to put themselves in a better financial position today. Don’t let unforeseen risk deter your ability to control and manage your life insurance policy. Learn more about how the Proformex solution can help you before disaster occurs.