Anyone in the insurance industry can attest to the fact that U.S. low-interest rates have become something of the norm. Unfortunately, these low rates have cause insurance companies to panic. The panic has had some serious ramifications. For example, policyholders of Transamerica are now suing the company due to unprecedented hikes in their monthly payments. The company raised the cost of monthly payments in order to keep up with low interest rates, but this came at the cost of customer satisfaction. Allegedly, the premiums of some policyholders practically doubled. This put the policyholders in a tough situation. They had to immediately decide whether or not to surrender their policies. This situation has raised the question among many life insurance policyholders of if outgrowing life insurance is going to become the new norm.
Policyholders are considering ‘outgrowing’ their insurance as the policy either lapsing or becoming unaffordable before time of death. The premiums have always been raised when the insurer’s health gets worse. If the insurer is pronounced terminally ill, or experienced another health trauma, their monthly payments may go up. However, the worry now is that premiums will increase whether or not the health status of the insurer is altered.
For those who are concerned, it is helpful to know the exact terms of whatever life insurance policy they hold. More often than not, life insurance policies are not reviewed in full. They are complicated and legal, and therefore mostly glanced over and put away. This is an issue because all beneficiaries of a life insurance policy should be aware of its full contents. There are several different life insurance policies in existence, and each means something different.
Term insurance, for example, is specifically death-related. It is the temporary life insurance option that costs less than others because most policyholders outlive it. Term life insurance is helpful in the event that one does not live to reach retirement age. On the other hand, whole life insurance and universal life insurance both have an investment component, which will pay no matter the time of death. The latter two are the types of policies in which premiums had to be raised in order to keep up with costs. This was due to the fact that Transamerica guaranteed annual interest rates of no less than 5%. This was their mistake.
In order to combat an unexpected rise in premium or loss of life insurance, every policyholder must keep in contact with their insurance company. Know exactly what policy you hold, and ask the insurance company questions about your policy often. You want to be able to see problems coming before they arrive.