UL Clients Approaching 100 Could See Coverage Terminate

Discussion in 'Life Insurance Forum' started by Brian Anderson, Aug 22, 2017.

  1. Brian Anderson
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    Brian Anderson Executive Editor Moderator

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    A fair amount was written in the press recently about a case where an insured, about to turn 100, is going to see his two Transamerica UL policies with a $3.2 million combined death benefit terminate as he hits the century mark.

    Gary Lebbin filed a lawsuit against Transamerica in late July, alleging that for decades carriers such as Transamerica sold permanent universal life policies, marketed as “insurance for life,” utilizing outdated mortality tables that did not take into account that Americans are increasingly living past 100.

    The complaint says the result has been “the improper termination of life insurance policies that were originally sold to policy holders as ‘permanent insurance.’ The life insurance industry has left its customers (who faithfully paid their premiums with the expectation that they would have coverage for the remainder of their lives) uninsured. Further twisting the knife, these terminations have exposed customers to adverse tax consequences that are in direct contradiction to the guarantees made when these policies were purchased.”

    More on this in the link below. If you have clients who purchased UL policies decades ago, is this issue on your radar and have you addressed it with any potential affected clients?

    Insurance Forums | Coverage for life
     
  2. Justin Bilyj
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    Justin Bilyj Guru

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    My heart goes out for their situation, but not them - read your policy people!
     
  3. jboussea
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    jboussea Guru

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    They get their death benefit ..but that creates a tax liability and a major one at that if they have outstanding loans.
     
  4. NewbieNewbie
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    NewbieNewbie Super Genius

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    Not on a ul that ends at age 100. It is why I will not sell a GUL that ends at 95, 100, or 105. For pennies more the can go to 121. Yes if they live to 122 they are sol but only a small handful ever have.
     
  5. DHK
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    DHK I Am Not Your Guru

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    This is no different than with Whole Life. Whole life 'endows' at age 100 (if using the older mortality tables, otherwise it's age 121). It's just that with Whole Life, the cash value EQUALS the death benefit at that age. UL does not have that guarantee. So, if you don't die by age 100... you get the cash value... just like you would with whole life.
     
  6. NewbieNewbie
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    NewbieNewbie Super Genius

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    Exactly cash but no benefit. If designed right you are fine. Sadly most were not. Would you you agree? I will admit you know more about us than myself
     
  7. DHK
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    DHK I Am Not Your Guru

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    Depends on the assumptions used in the illustration (and the sales process & literature) and how well the policy was maintained & managed.

    These people would be understandably upset if they had a million dollar policy and only $50k cash values (for example).
     
  8. NewbieNewbie
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    NewbieNewbie Super Genius

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    But would you agree that for most that bought in the 80s and 90s it is not pretty.
     
  9. eersfan
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    eersfan Expert

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    Most of the UL purchased in the 80's and early 90's blew up a long time ago IF the only premium paid was that which was illustrated when the contract was purchased when the illustrated current interest rates were above 10%.
     
  10. Newby
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    Newby Guru

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    100? Tons of these things blow up in their early 80's. I've met more pizzed off people with UL policies that paid a ton of premium into them than I can count.
     
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