Class action lawsuits are now being filed against life insurance companies who dramatically increased costs on policies from the 1980s and early 1990s.
What You Can Do & How We Can Help
The Schmidt Firm, PLLC is currently accepting insurance fraud cases in all 50 states. If your universal life insurance premiums or monthly deduction went up, you should contact our lawyers immediately for a free case consultation. Please use the form below to contact our Consumer Fraud Litigation Group or call toll free 24 hours a day at (866) 920-0753.
Life Insurance Lawsuit Settlements
In October 2018, Transamerica Life Insurance Co. agreed to pay $195 million to settle a class action lawsuit accusing the company of improperly increasing the monthly cost on 70,000 universal life insurance policies.
In May 2018, Nationwide privately paid a settlement in a similar class action lawsuit over the cost of life insurance. In July 2018, John Hancock Life Insurance Co. settled a class action lawsuit for raising the cost of life insurance.
Axa Equitable Life Insurance and Lincoln National Corp. are also facing class action lawsuits for raising the costs of their universal life policies.
What is Universal Life Insurance?
Universal life insurance guarantees a payout whenever the policyholder dies. It also has an investment element that accumulates cash value and can be used as retirement income.
How Are Costs Determined?
Insurers use mortality tables to estimate how many policyholders will die and how much money they will need to pay out. They also invest the premiums and use the income to pay each claim.
Low Interest Rates and the Cost of Life Insurance
The popularity of universal life insurance skyrocketed in the 1980s, when the average investment yield for insurers was nearly 10%. When the economy was good, insurers promised policyholders generous returns of 4-5% annually. But with current yields just under 5%, insurers are making less money and costs are going up.
Life Insurance Isn’t Bought, It’s Sold
Increasing costs on older policies used to be taboo. Insurers did not want to generate lawsuits or create distrust among consumers. That attitude is changing now that most people who bought universal life insurance in the 1980s are over 70 years old, with few alternatives.
How Much Are Premiums Going Up?
The Wall Street Journal estimates that the extra annual cost range from about $150 a year for a $250,000 policy to six-figure sums for policies above $10 million, depending on your insurance company.
What Options Do Policyholders Have?
There are not many options — especially for policyholders who are over 50 years old, which is why many of them have joined class action lawsuits. Each option has major disadvantages:
- Refuse to pay the higher monthly rate: The cash value account will deplete and the policy will eventually lapse.
- Take whatever cash remains: You must give up the policy and pay taxes on the cash.
- Change life insurance policies: Older people in poor health may not be able to find an affordable replacement policy.
- Reduce the death benefit: This extends the period of coverage but reduces the payout.
Banner Life Insurance Class Action
In April 2016, Banner Life Insurance Company was hit with a class action (PDF) over massive cost increases. Some plaintiffs were told their monthly payments would rise as much as sixfold.
Lawyers say policyholders were misled and Banner’s actions are “tantamount to an attempt to cancel the policies and/or raid the policies of accumulated policyholder savings.”
Transamerica Life Insurance Class Action
In February 2016, Transamerica Life Insurance was hit with a federal class action (PDF) over massive price increases — Case No. 2:16-cv-01378.
In the late 1980s, Transamerica sold universal life insurance policies that guaranteed rates of no less than 5.5% annually. In August 2015, the company suddenly increased the deductions withdrawn from policyholders’ cash value accounts by 38%.
Do I have a Cost of Life Insurance Lawsuit?
The Schmidt Firm, PLLC is currently accepting insurance fraud cases in all 50 states. If your universal life insurance premiums or monthly deduction went up, you should contact our lawyers immediately for a free case consultation. Please use the form below to contact our Consumer Fraud Litigation Group or call toll free 24 hours a day at (866) 920-0753.
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