How to Understand Maxed Out Universal Life Insurance
- 1). Get out your most recent annual statement. Look at how much is being taken out of the cash values for the cost of purchasing the term insurance portion of the policy. Mortality expenses (cost of the insurance based on the insured's age) plus loading expenses (policy investment and maintenance fees) are deducted from the cash values of the policy each month. The mortality costs go up with the age of the insured. Loading expenses might increase from time to time, depending on the insurance company's loading expense schedule.
- 2). Check to see whether the total mortality and loading expenses exceed the premiums you have paid and interest earned in the cash value account. A cash value account with insufficient funds to pay the total mortality and loading expenses will result in terminated insurance.
- 3). Read the statement to see whether a partial surrender or cash withdrawal that you made reduced the cash values to the point that there is not enough left to cover mortality and loading expenses.
- 4). Ask your agent to take a look at your account. Have him explain what happened with the cash values and why there isn't enough cash value to continue the insurance. Find out why the agent did not notify you before the cash values were exhausted, and have him help you determine how much the premium must be increased.
- 5). Reinstate the policy. There is a 30- to 60-day grace period on the policy. Pay a large enough premium to cover mortality and loading expenses and invest in the cash value account. Universal life policies have an adjustable premium feature. The premiums can be adjusted as needed to make sure there is enough cash value to cover the cost of the insurance.
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