I recently read an article from “Moneywise.” This article shares a story about a 72-year-old woman whose life insurance policy is being terminated despite her life insurance premiums being paid every month since 1987. It goes on to say that this is a very common issue. I shared this story with my Facebook followers with the caption, “Don’t let this happen to you or your elderly loved ones!”
The post generated a lot of reactions and responses. I’m going to share details of the article as well as some of the comments I received below. Before I share this story, I’d like to establish that omission of the truth, exaggeration of the truth, or a half truth is a whole lie. I’d also like to point out that a Whole Life Insurance policy is billed as a permanent life insurance policy. Unlike a Term Life Insurance policy where the term of the policy has a finite timeline before the policy expires or terminates, be it a 10-year term, 20-year term, or 30-year term. Whole Life Insurance policies are to provide a death benefit and a savings component that is to last your entire life. Upon your death, your beneficiaries are to receive the face amount of your life insurance policy that will cover your funeral expenses and help provide a cash cushion for your beneficiaries. Why is the elderly woman’s insurance policy being terminated if it’s its Whole Life policy? Inquiring minds want to know!
A 72-year-old woman was apparently left “upset” and “broken” after paying into her life insurance policy for 36 years —only to get notice it will soon terminate and pay out literally nothing. The unfortunate tale was recounted on TikTok by a user named Tanya, who frequently offers insurance advice on the platform.
The elderly woman received a letter “she didn’t understand,” which stated that her Universal Life (UL) Insurance policy would terminate in February 2025—despite her holding the policy and paying her premiums since 1987.
When she asked what she could do to keep her policy, she was told “there’s literally nothing”—unless she wanted to cash it out early for a measly $70.
Here’s how UL insurance can catch you off-guard if you don’t fully understand what you’re paying into.
A UL insurance policy is a type of permanent life insurance that contains two parts: a death benefit—the lump sum your beneficiary receives—and cash value, which is a built-in savings and investing feature.
Depending on which type of universal plan you choose, you may be charged a fixed or an adjustable premium. Your premium will cover two things: the Cost Of Insurance (COI) amount and cash value.
Premiums first cover the COI, which is the minimum you must pay to get coverage. Anything on top of that goes toward the cash value and is invested so it can grow. Note that some UL policies charge investment fees.
The premiums of a UL policy are flexible. They may start lower but increase as you age. If you do not keep up with your premiums, the policy can eat into your cash value—potentially impacting your death benefit or causing your policy to lapse.
This appears to be what happened to the 72-year-old woman. In the TikTok video, Tanya says she told her: “I understand you’ve had that policy since 1987. You’ve done nothing wrong, you’ve paid your premiums on time, every month, faithfully. However, the policy is running out of cash value because you’ve been paying the same premium every year since 1987. You haven’t increased it, you haven’t put any more money into your cash value. Therefore, there’s not enough money to offset the cost of insurance, so now your policy’s about to end.”
The premiums of a UL policy are flexible. They may start lower but increase as you age. If you do not keep up with your premiums, the policy can eat into your cash value—potentially impacting your death benefit or causing your policy to lapse.
When the elderly lady was given the final sucker punch—that her cash surrender amount had shrunk to just $70 because it was used to offset the cost of insurance—the elderly woman hung up the phone.
***
Why are these people scamming her?
~Genel
Damon Says: It’s not a scam per se. It’s selling products without properly explaining how they work. They sell the BOLD print without explaining the fine print. What the BOLD print gives, the fine print takes away. It’s vitally important that we read the fine print on all contracts!
If people really understood cash value insurance products, everyone would opt for term insurance instead.
***
What About Whole Life Insurance?
~Rose
Damon Says: Having some type of life insurance in place is better than having no life insurance at all.
Whole Life Insurance is a form of cash value life insurance as well. It’s more basic and straightforward than universal life insurance.
It’s important to note that upwards of 80 percent of all cash value life insurance lapse before paying a death benefit. To be fair, 99 percent of all term life insurance lapses before paying a death benefit. Safe to say, the majority of all life insurance policies never pay a death benefit. The difference being people pay or
on term life insurance policies because cash value policies tend to cost up to 10 times more than a term policy.
Insurance products should be used to transfer risk, not save and invest.
If you compare term life insurance to any form of cash value life insurance, you’ll learn that term life insurance is more affordable and easier to understand.
If you compare return on investment on stand alone saving/investment products in comparison to
The advice generally given by those of us who don’t earn a commission off of selling life insurance is to get a term policy and save and invest separately. This gives you more control and the biggest bang for your money. The problem with this advice is people will get term life insurance then neglect to save and invest. When the term period ends, they’re older and oftentimes not as healthy making it harder to get life insurance of any kind.
(Money Coach Damon Carr can be reached at 412-216-1013 or visit his website @ www.damonmoneycoach.com.)
About Post Author
