up button showing universal life insurance quotes are going upIf you’re thinking about buying universal life insurance with lapse protection (secondary guarantees), the time to make your decision is right now.  Universal life insurance quotes for policies with lapse-protection are expected to rise substantially next year, beginning on January 1st.

These policies are ideal for people who simply want lifetime coverage with guaranteed premiums and death benefit, and aren’t concerned about accumulating cash in a policy.  They can be structured to have the premium and face amount stay the same for the life of the policy.

They’ve also been available at a nice price. But market trends and new regulations that will take effect in 2013 will almost certainly cause quotes for universal life insurance policies with lapse protection to increase.  As a matter of fact, some companies have notified agents that certain policies will no longer be available after December 31st.you

New Reserve Rules

New reserve requirements being enforced by the National Association of Insurance Commissioners (NAIC) are a principal reason for the anticipated rise in universal life insurance rates for lapse-protection policies.

  • For these types of policies, insurance carriers are required to keep a reserve fund (including future premium payments and interest earnings) that’s large enough to cover all claims that will arise in future years from the policies currently in force.
  • Beginning with policies written on January 1, 2013, the amount that insurance companies must keep in reserve will increase. There’s also speculation that reserve requirements for some in-force policies will be increased.
  • The raising of revenue requirements is intended to provide greater protection for consumers.

The inevitable result will be that insurance companies will pass on the additional costs to consumers who buy these policies after the end of this year. The costs may come in the form of higher premiums, less-beneficial policies, or both.

Low Interest Rates

There’s also a general market trend that will impact the cost of lapse-protection universal life policies. The current low interest rates are hurting insurance carriers because they rely heavily on investment income. As investments mature and they need to reinvest the money, they are not able to obtain the same yields as the older investments.  To make up for the loss of investment income, one solution may be to raise costs for universal policies.

The Bottom Line

Before you ring in the New Year, contact an experienced independent life insurance agent to help you look into universal life insurance with lapse protection.  Your application must be at the company before the end of the year.  If you put it off until next year, you’ll likely find that the universal life insurance quotes you get will be significantly higher than they are now.

Photo Credit: Breahn Foster