“Just like the technology bubble burst in 2001 and the real estate bubble burst in 2008, the next bubble may very well be in the life insurance industry,” says Kennon. “While owners of term and whole life insurance can breathe easy, a majority of universal life insurance policies are in extreme danger.”
Kennon refers to statements from John Dirouard, author of The Ten Truths of Wealth Creation, who says, “Hidden in these polices is a potential time bomb. The insurance industry has a dirty little secret that threatens the retirement plans of millions of unsuspecting families.”
Across the country, consumers are receiving startling and unexpected notices in the mail. These notices state that even though policyholders have been faithfully paying into their life policy, low interest rates have affected the integrity of the guarantees.
Kennon says the problem arises with the structure of permanent, cash-value insurance. In the early years, policy owners pay extra premiums to build up cash inside the policy. This cash, in turn, generates interest which helps cover the policy’s internal fees in later years. However, these policies originally assumed interest rates of 8-10 percent. With the Federal Reserve keeping rates at historic lows, universal life policies are now producing far lower dividends than expected. As individuals age, the internal fees within their insurance contracts rise. As fees rise, the value of the cash inside the contract drops. When the cash value hits zero, the policy lapses.
Kennon suggests that anyone who owns life insurance would be wise to have it reviewed by an insurance professional. If addressed early, many times the problem can be averted.
About Gulf Coast Insurance Advisors
Based in Sarasota, Gulf Coast Insurance Advisors (www.gulfcoastinsuranceadvisors.com (http://www.gulfcoastinsuranceadvisors.com)) is dedicated to reviewing and auditing insurance policies. President David Kennon is a frequent speaker and advocate for consumer rights in the areas of life insurance and long-term care insurance. For information, visit http://srqlifereview.com or call 800-873-6673.