What to Do If You’re a Victim of Misrepresented Insurance Practices

What to Do If You’re a Victim of Misrepresented Insurance Practices

Note: This is Part 2 in our ongoing series examining Universal Life insurance. Read Part 1 here.

Have you been paying for a Universal Life, Indexed Universal Life or Variable Life insurance policy? Has the insurance company forced you to cancel your policy after greatly increasing your premiums? If so, you might be the victim of misrepresentation in insurance practices and could be eligible for compensation.

However, your time to act is limited, so keep reading to learn more about how to protect rights.

The History of Universal Life

In the 1980’s the life insurance industry created a new type of life insurance policy called Universal Life or Variable Life. These policies grew in popularity because they are seemingly much more affordable than Whole Life insurance– in other words, the monthly premium costs are lower.

Today, top-tier and reputable insurance providers no longer offer these policies after they realized what a bad option they are for their clients and better available options.

The Difference in Insurance Policies

What is the difference between different life insurance policies?

Whole Life Insurance (WL) is a great policy and investment where one premium payment is set, it does not change, and when you die, the full amount of the policy is paid out to the beneficiary. It’s very simple! Universal life (UL) or Variable Life (VL) policies are often misrepresented and sold by agents as being the same type of policy as Whole Life, only less expensive.

Sounds great, right? You get the same life insurance but pay much less!

Just remember: there’s no such thing as a free lunch. If something sounds too good to be true it probably is. These are cliches for a reason: they’re true.

The problem is that many insurance agents never told purchasers of these Universal Life policies that at any time the insurance company chooses, they can “adjust”, better known as “raise”, the premiums, often times increasing them by significant margins.

Usually, very short notice is given to the policyholder, and there is no appeals process. The original insurance agents selling these policies usually didn’t tell the purchaser that the increase in premium has no cap, so it can be 200%, 400% or even much more. This is a big problem when you have been counting on a consistent premium amount for years and now can’t afford it.

Insurance agents often didn’t tell people the spreadsheets showing return on investments of “illustration” literally meant nothing because they were not guaranteed, usually were not accurate and almost never showed an increase in premiums. Without exception, with Universal or Variable Life policies, you can rest assured: your premiums will increase.

That doesn’t sound great. And by comparison,  the premiums for Whole Life (WL) insurance policies don’t ever increase. Period.

What’s Worse Than Increasing Premiums?

Here’s the kicker: If you don’t continue paying your new, increased premiums for your UL or VL policy, you get NOTHING and those you were trying to financially protect get nothing.

You’ll lose the entire policy AND you will not get any money back for the premiums you already paid. You lose all that money, the policy has no cash value, and you don’t get any of the insurance if you can’t afford it when the premium increases. The insurance company wins and you and your beneficiaries lose.

Often, UL and VL policies are sold as an “investment.” Unfortunately, this sounds like a pretty bad investment once you know the facts, doesn’t it?

Why Premiums Increase

Retirees at Risk

Here’s another problem I’ve been seeing: The premiums for UL and VL policies often increase right around the time the policyholder is retiring.

Insurance companies know that statistically the majority of people insured will not die before they retire. They also know that when people retire, they usually have a fixed income. It’s not complicated: if your bills exceed your set income, you can’t pay all your bills.

When the insurance companies raise your life insurance premium by 400%, the old premium that you may have been paying for decades, is now hundreds or thousands of dollars per month more. Is it a coincidence the increase comes right when you can’t afford it due to a fixed income? I don’t think so.

As a result, many people are forced to let their life insurance policies be cancelled because they can’t afford the new higher premium once they retire.

Insurance companies know that statistically they will profit because of (not in spite of) these terrible policies. People on fixed incomes will not be able to afford their premiums, which forces them to cancel their policy. They will owe nothing when the person dies, and the person will have already invested tens if not hundreds of thousands of dollars in the company, that the insurance company gets to.

Alternatively, you can continue to pay a much greater premium and keep your old policy. The problem with that is the insurance company has got you again! If the premium is significantly raised around retirement age, let’s say 70 years old, you are likely these days to live to at least 90 years, if not longer. That means, to keep your policy, you will be paying the increased premium for another 20 years. In many cases that means the money you have spent on premiums will be more than the policy benefit. For example, you may very well pay the insurance company more than $100,000 over the life of the policy, only to receive a benefit of $100,000. In other words, you have lost money.

Think about it:  you pay an insurance company a ton of your money, they keep it and they know statistically that many people won’t die before they raise the premiums, at which point they won’t be able to afford the increased premiums allowing them to cancel the policy benefits. Or you pay the increased premiums on the old policy and end up possibly paying the insurance company more money that the policy benefit. That means they have received interest on your money, and you actually lost money for your loved ones and beneficiaries by holding on to this policy. Win – Win for the insurance company.

Did you trust your insurance agent, and can’t believe they would sell you something like this? In many cases, the agents themselves didn’t fully understand these policies. That means they could not have fully informed you about them either.  So why would they sell them? The insurance companies made it worth their while with COMMISSIONS! Insurance companies really wanted to sell these policies and start generating revenue. They accomplished this goal by giving the agents and brokers very nice commissions on the sale of these policies, much higher commissions that more traditional and better investment and insurance policies.

The Judnich Law Office is Here to Help


We at the Judnich Law Office are accepting consultations for people who have purchased these policies and may have been the victim of misrepresentations by insurance agents that did not fully inform them about these policies – or suggested these policies instead of more traditional investments.  If you have a Universal Life or Variable Life insurance policy and were not fully advised of all the risks you were taking when you purchased the policy, give us a call or contact us online for a free consultation. We’ll listen to your story, explain your rights and discuss your options. There’s no cost and no obligation to retain our legal services.

It’s important to act quickly. You have a limited time in which to pursue these claims in court, so call today before it’s too late. Our toll-free number is: (855) 853-1482.

Photo Credits: William WarbyJay M