Retirement disaster may loom for holders of universal life insurance policies
Some life insurance is now worthless
6:00 PM, Mar 26, 2013
1:20 AM, Mar 27, 2013
TAMPA - It is estimated that, since 1980, more than a million consumers purchased universal life insurance, including at least 100,000 in Florida. These policies now threaten the retirement plans of many who paid into them.
Retired corporate executive Hans Johnson bought universal life insurance in 1999 as protection for his wife, Mick.
The Johnsons paid $85,000 in premiums over the years. They have nothing to show for it.
What happened to the Johnsons is affecting countless universal life policy holders across the country.
Insurance advisor David Kennon says policy holders will find the explanation in their policy's fine print. The bottom line: These policies, unlike whole and term life, are tied to interest rates.
If you purchased the policy when interest rates were high in the 80s and 90s, chances are you are going to lose your coverage and all of the money you paid in, according to Kennon.
Some experts estimate this will effect the retirement plans of tens of thousands of Floridians like the Johnsons.
If interest rates don't rise soon, policy holders will have to kick in more money to maintain their coverage. Dave Kennon worries many universal policy holders are not aware their policy is near death.
If caught in time, some consumers will be able to trade in this type of policy for another, less risky life insurance plan.