The life insurance industry today is an industry in crisis.
One reason is the cash values of whole life and universal life policies have been decimated by decades of unexpected low interest rates.
People all over the nation are opening their mail and finding letters informing them policies they have paid premiums on for decades will soon lapse. This means no more cash value and no more death benefit. Every dollar they paid over the years will have been wasted. And by the time they receive these notices possible solutions are no longer affordable.
And yet no one is ringing the panic bell alerting policy owners of this problem.
When I speak with these people everyone of them tells me they just assumed if they were paying the premiums they were being billed their policies would remain in force until they died. Unfortunately, this just isn’t so. And so every day large numbers of universal life and whole life policies are lapsing to the utter surprise and amazement of those who own them.
While short sighted financial advisors often tell middle age people they won’t need life insurance later in life, the fact is many senior citizens count on life insurance proceeds to provide surviving spouses with the funds needed to pay their bills. When one spouse dies the income the surviving spouse receives often declines dramatically. This is especially true for people who depend on social security or a spouse’s pension income to meet their living expenses.
So why don’t life insurance companies warn all their clients about this problem.
First, they fear such notices would trigger the mass surrender of outstanding life policies, which would bankrupt most life insurance companies. Second, they fear class action law suits would surely follow if millions of life insurance policy owners were alerted to this problem. Sadly, it is in a company’s best interest to let these policies gradually lapse over time. And that’s exactly what’s happening.
