Life insurance

[Sherwood Ruth]

I took out a 25K life policy in '84 when I was 53 yrs old.
Payment was $50 per mo. Later the salesman told me I could add 25K more for only $25 increase in premium, to $75. Then they came around and said my payments were not covering the cost of mortality rate increases. I increased my premium to $85. Now I am retired and living on Social Security, I see that if I do not increase my premium by $32 more per month, my policy will lapse when the difference in mortality increases eats up the policys cash value. Is this legal? Why I wasn't informed of this way back then?

 

[HomeGuru]

There are 2 basic types of life insurance; term and whole life. You bought the wrong type.

 

[ALawyer]

You seem to have bought a type of coverage in which the premium rate was not guaranteed, and you problably did not understand what you bought, through little fault of yours. Given the premium rate -- $600 per year for $25k coverage for a then 53 year old, if you were in good health it probably was Universal Life. I am NOT sure what the second policy was.

It is VERY unusual for the company to raise MORTALITY CHARGES as mortality has improved, not decreased. Unless they are using that to make up for the lower interest rates that are prevailing, which probably is illegal.... Thus, a large number of class action suits have arisen against many insurers for doing that. Check with your state insurance department about this.

If you can't afford the premuim, you can drop the policy, after taking out any cash value or if you are ill, you may sell it as a viatical settlement to a broker.