Universal Life Insurance Premiums Going Up? Your Options

The letter arrives in a plain envelope from your insurance company. You have been paying on this policy for decades, steadily, on time. You open the envelope expecting a routine statement.

Instead, a number on the second page stops you. The premium on the policy you have held for 25 years is going up sharply. Not by a few percent. It is doubling. Or tripling. And there is a line about how much you will need to pay to “keep the policy in force.”

If you are reading a letter like that right now, you are not misunderstanding it and you are not alone. Premium increases on universal life insurance policies are a widespread and documented pattern. They have affected millions of policyholders and produced hundreds of millions of dollars in class action settlements from some of the largest insurers in the United States.

This guide walks through exactly why this is happening, what rights you have, and the six real options available to you. Take your time reading it. No decision you make today needs to be made today.

This Has Happened to Millions of Policyholders

Every major universal life carrier in the country has been sued in a class action over the way it raised internal charges on in-force policies. Each of those lawsuits has settled, or is currently in settlement negotiations, for tens or hundreds of millions of dollars.

Major Class Action Settlements on Universal Life Premium Increases

A note on what this means for you. Most of these settlements are closed to new claims, and those still open apply to narrow policy forms from specific years. Individual payouts, even for automatically included class members, have been modest. The value of this data is different: it documents that the pattern you are experiencing is real, widespread, and serious enough that the country’s largest insurers have collectively paid close to a billion dollars to resolve it. This is not bad luck, and it is not your fault. It is a documented industry pattern, and it changes every conversation you have from here.

If you want to read the public record for your carrier, the settlement websites are: Lincoln COI, AXA COI, John Hancock COI, and Voya COI. Think of them as investigative references, not claim portals.

Why Your Premium Is Going Up

Three things went wrong at the same time, and every universal life policy sold between the 1980s and the early 2000s is feeling the effects.

1. Interest Rates Collapsed

Universal life policies have an internal savings account called the cash value. Your insurance company credits interest to that account, and the growth of the cash value is what is supposed to help cover your insurance costs as you age.

Policies sold in the 1980s and 1990s were illustrated at crediting rates of 7 to 12 percent. After 2008, prevailing interest rates collapsed, and most universal life policies have been earning only their guaranteed minimum of 2 to 4 percent ever since. The difference compounds viciously across 25 or 30 years. A policy illustrated to have $200,000 in cash value by year 25 may actually have $40,000. A policy designed to carry itself through your 80s may run out in your 70s.

2. Cost of Insurance Charges Went Up

Inside every universal life policy is a monthly charge called the cost of insurance, or COI. The COI pays for the actual death benefit, and unlike a whole life premium, it rises every year as you age.

When interest rate earnings dropped and cash values stopped growing as projected, insurance companies responded by raising COI charges on existing policies. The class action cases above document increases of 25 percent to over 70 percent, often on policies owned by seniors over 70 with face amounts above $1 million. Plaintiffs have alleged these increases were outside what the original contracts permitted. Some courts have agreed, calling certain insurer interpretations “absurd.”

3. The Original Illustration Was Never a Guarantee

When a universal life policy is sold, the agent walks the buyer through a printed illustration that projects how the policy will perform over time. These illustrations are based on assumptions about interest rates, investment earnings, and insurance costs. They are not guarantees, and the fine print always said so, but most policyholders reasonably believed that the number at the bottom of the page was what the policy would actually do.

Here is a side-by-side comparison of what policyholders were typically shown in the 1990s versus what actually happened.

When all three factors line up, the result is what the industry privately calls an underfunded or zombie universal life policy. The cash value is being eaten faster than premiums can rebuild it, and without additional payments the policy is scheduled to lapse, often before the insured’s actual life expectancy.

What to Do First: A 4-Step Checklist

Before you make any decision, before you respond to the insurance company’s letter, and before you pick any of the options later in this guide, do these four things in this order. None of them commit you to anything, and the first one is free and is required by law.

Step 1: Request an In-Force Illustration

Under the National Association of Insurance Commissioners’ Model Regulation 582, which has been adopted by most states, you have a legal right to request a current in-force illustration from your insurance company once per year at no charge. The insurer generally must respond within 30 days.

An in-force illustration is a printed projection showing exactly where your policy stands right now and exactly how long it will last under different assumptions. Ask for four versions:

1. The guaranteed assumptions version, which shows how long the policy would last at the worst-case crediting rate and the maximum allowed cost of insurance. This is your floor.
2. The current assumptions version, which shows how long the policy will last at today’s actual crediting rate and cost of insurance. This is your realistic timeline.
3. The premium required to hold the policy to age 95, 100, and 121.
4. The premium required to hold the policy if you reduce the death benefit by 25, 50, or 75 percent.

Those four numbers will tell you more about your actual situation than any phone call with the insurance company ever will. Put the request in writing. Keep a copy.

Step 2: Look Up the Case Record for Your Carrier

Take your policy’s product name from the annual statement and compare it to the policy forms named in the settled cases listed earlier. Here is what the exercise will tell you, and what it will not.

• If your policy form appears in a settled case, you now have the clearest public record of how your carrier approached COI increases on your class of policies. That is useful background for any conversation you have with the insurer, a fiduciary, or an attorney.
• Do not expect a class action to solve a current premium problem. Most of these cases are closed to new claims, and class members who were automatically included typically received modest individual payouts. Some settlements did include non-monetary relief like multi-year freezes on further COI increases, which is meaningful, but that relief applies to a specific block of policies from a specific period.
• If your policy is not in any known settled class, your situation is not necessarily different. The underlying mechanics are the same across carriers, and the rights in the remaining steps apply regardless of whether a lawsuit has been filed over your specific policy form.

The goal of this step is context, not compensation. Knowing whether your carrier has already been to court over the same issue changes the texture of every other conversation you have from here.

Step 3: Do Not Call the Insurance Company’s Retention Line Yet

When a policyholder responds to an increase notice, they are often routed to the carrier’s retention or conservation department. These departments are trained to keep the policy on the books with the smallest concession possible, usually a modified premium arrangement or a death benefit reduction. That might be the right answer, but the retention representative is not going to lay out all six of your options or show you what a competitive market would pay for the policy.

Request the in-force illustration first. Read it. Come back to the conversation with numbers.

Step 4: Get a Second Opinion from a Fiduciary

The agent who sold you the policy is not a fiduciary, and neither is the representative on the retention line. A fiduciary is someone with a legal duty to act in your interest, not in the interest of the insurance company. That can mean a fiduciary-licensed life settlement broker, a fee-only financial planner, or an elder-law attorney.

A fiduciary can help you interpret the in-force illustration, evaluate every option on its merits, and catch pressure tactics or unsuitable recommendations. There is no obligation in getting a second opinion. In almost every case, it costs nothing.

Your Six Real Options

Before you look at the options, decide what you actually want. Policyholders in this situation usually fall into one of three groups.

• Group A: You want to keep some death benefit for heirs, but you want to stop the rising premium.
• Group B: You want to reduce the premium bill, and keep the policy in some form.
• Group C: You want to get cash out, because the coverage no longer serves a purpose.

Each option below fits one or more of those goals. The right answer depends on which group you are in.

Option 1: Pay the Increase

You can pay the increased premium. For some policyholders with strong retirement income and a clear reason to keep the coverage, this is the right call.

Best when: You still need the full death benefit, you can comfortably absorb the new premium, and the in-force illustration shows the policy will actually last long enough to matter.

Watch out for: Increases that will compound. A 40 percent jump this year often signals that more COI increases are coming, and your in-force illustration will show whether the new premium schedule is stable or just the first step up.

Option 2: Reduce the Death Benefit

Most universal life policies allow you to lower the face amount, which directly reduces the cost of insurance charges. A $1 million policy cut to $400,000 can often become affordable again, and you keep some coverage for heirs.

Best when: Group A or B. You want some death benefit, but not the original amount, and you want the premium bill to go down.

Watch out for: Partial surrender tax consequences if the reduction also pulls out cash value above your cost basis.

Option 3: 1035 Exchange to Guaranteed Universal Life

Internal Revenue Code Section 1035 permits a tax-free exchange of your existing universal life policy’s cash value into a new policy, usually a Guaranteed Universal Life (GUL) policy that locks in both the premium and the death benefit to a specific age, typically 95, 100, or 121. A GUL is effectively permanent term insurance. It carries no cash value build-up, but it also does not blow up the way a traditional UL can.

Best when: You are still insurable, you want predictability, and leaving a fixed death benefit matters more than maximizing cash.

Watch out for: The new policy requires fresh medical underwriting. If your health has changed since the original policy was issued, you may not qualify, or the new death benefit may have to be lower. Also be wary of an agent recommending a replacement purely to earn a new commission. That practice is called churning and is restricted under NAIC Model Regulation 613.

Option 4: Reduced Paid-Up Insurance

Your existing cash value is used to purchase a smaller, fully paid-up death benefit, and you stop paying premiums entirely. A $500,000 policy with $60,000 in cash value might convert to a paid-up policy worth roughly $90,000 to $130,000 in death benefit, depending on age and policy terms.

Best when: Group A. You want to stop paying forever, and you want to leave something behind.

Watch out for: The reduced death benefit may be much smaller than you originally expected. Ask the insurer exactly what the paid-up face amount would be before you commit.

Option 5: Surrender the Policy

You cancel the policy and receive the cash surrender value, which is usually a fraction of what the policy is actually worth. Surrender charges may still apply on newer policies, though they have typically expired on anything held more than 15 or 20 years.

Best when: Group C, but only as a last resort. You need cash quickly, the policy does not qualify for a life settlement, and you have ruled out everything above.

Watch out for: On a struggling universal life policy, the cash surrender value has often been depleted by rising cost-of-insurance charges, so the check may be surprisingly small. Gains above your cost basis are taxed as ordinary income.

Option 6: Sell the Policy Through a Life Settlement

A life settlement is the sale of your policy to a third-party buyer on the open market. You receive a lump-sum payment, the buyer takes over the premiums, and the death benefit goes to the buyer when you pass away. According to the Life Insurance Settlement Association, sellers in 2024 received an average of 6.5 times what the insurance company would have paid them in surrender value.

Best when: Group C. You are 65 or older, the face amount is $100,000 or more, the coverage no longer serves a clear purpose, and you want to recover the most possible value from an asset you were considering giving up anyway.

Watch out for: The process takes 60 to 90 days. You give up the death benefit entirely. And proceeds above the cash surrender value are generally taxed, though often at the more favorable long-term capital gains rate rather than as ordinary income.

The One Option to Avoid

The worst thing you can do is stop paying and let the policy lapse quietly. A lapse gives you nothing. No cash, no coverage, no further recourse. And because a lapsed policy may still carry a tax liability on policy loans, some seniors are left with a small tax bill on top of getting nothing. Almost any of the six options above is better than walking away.

Red Flags to Watch For

Not everyone who is about to give you advice on your universal life policy has your interests in mind. Here are the warning signs.

Your Consumer Protection Rights

You have more rights than the insurance company’s letter suggested. These are the ones most policyholders do not know about.

• The right to a free annual in-force illustration under NAIC Model 582.
• The right to file a complaint with your state Department of Insurance. Every state has a consumer complaint process. Start at the NAIC consumer portal and follow the link to your state. A DOI complaint can trigger a market conduct review and, in some cases, force the insurer to the table.
• Class action opt-in rights. As noted earlier, if your policy is part of a certified class, you may already be a class member.
• Grace period and reinstatement rights. Most universal life contracts provide a 61-day grace period after a premium shortfall before the policy technically lapses, and most permit reinstatement within three to five years of a lapse if you can provide evidence of insurability and pay the back-due charges. A policy is often not as gone as the insurance company has suggested.
• Replacement disclosure rights under NAIC Model Regulation 613. Any producer recommending you replace an existing policy must provide a written replacement notice and retain records of suitability analysis.

State insurance regulators have specifically warned the public about this issue. The New York Department of Financial Services, the Wisconsin Office of the Commissioner of Insurance, the Maryland Insurance Administration, and the Oregon Division of Financial Regulation have all issued consumer alerts urging universal life policyholders to request in-force illustrations annually and to understand that the product requires ongoing monitoring. If you suspect an improper sale or an unjustified increase, reach out to your state’s consumer services line.

When a Life Settlement Is the Right Answer, and When It Is Not

For many seniors facing a universal life premium increase, a life settlement is the option that recovers the most value. For others, it is the wrong tool. Both are true, and an honest guide should say so.

For a policy that does fit the settlement profile, the difference in outcomes is often dramatic. A $500,000 universal life policy held by a 78-year-old in moderate health, with $18,000 of cash surrender value and a premium about to increase by 40 percent, might produce a competitive settlement offer somewhere between $110,000 and $180,000. The exact number depends on health, policy structure, and the buyer’s internal return requirements. You can see a broader breakdown of typical ranges in our average life settlement payout guide.

What to Do This Week

If you are reading this because of a letter you received in the last few days, here is a simple order of operations.

1. Today: File the in-force illustration request in writing with your insurance company.
2. This week: Look up your policy’s product name against the class action settlement websites listed earlier.
3. In the next 30 days: When the in-force illustration arrives, review it carefully. Ask a fiduciary to help you interpret it if the numbers are not clear. Compare your real options side by side before you respond to the insurance company.
4. If a life settlement fits your situation: Request an estimate with no obligation. A licensed broker shops your policy to multiple institutional buyers, the buyers bid against each other, and you review the offers with no cost to you. The broker is compensated by commission from the completed sale, paid from the buyer’s side.

Whatever you decide, make the decision on your timeline, with complete information, and without pressure. You have more options than the insurance company’s letter made it sound. To get a free policy estimate on https://www.citizenslifegroup.com, use the form on our homepage or call (321) 270-0279.

Sources

• NAIC Model Regulation 582, Life Insurance Illustrations — Establishes the policyholder’s right to a free annual in-force illustration and sets the content requirements for universal life illustrations.
• NAIC Model Regulation 613, Replacement of Life Insurance and Annuities — Requires written replacement disclosures and suitability analysis; the baseline rule preventing churning.
• Life Insurance Settlement Association 2024 Market Data Survey — Source for the 6.5 times average cash surrender value multiple and the estimate that more than 11 million policies with over $754 billion in face value are surrendered or lapsed each year in the United States.
• In re Lincoln National COI Litigation, $110 million settlement — Final approval in October 2023 covering former Jefferson-Pilot universal life policies with alleged COI increases up to 40 percent.
• Brach Family Foundation v. AXA Equitable, $307.5 million settlement — Settlement of claims over 2015 COI increases of 25 to 70 percent on Athena Universal Life II policies.
• Leonard v. John Hancock, $123 million settlement — Settlement covering Performance UL COI increases imposed beginning in 2018 and 2019, including a five-year COI freeze.
• Consumer Watchdog Transamerica Litigation Hub — Documentation of the multiple Transamerica COI settlement funds, including the Handorf case addressing 2022 and 2023 increases.
• New York State Department of Financial Services, Wisconsin Office of the Commissioner of Insurance Consumer Alert (December 2021), Maryland Insurance Administration Universal Life Advisory, and Oregon Division of Financial Regulation UL Premium Guidance — State regulator consumer alerts urging universal life policyholders to request in-force illustrations annually.
• Internal Revenue Code Section 1035 — Federal statute permitting tax-free exchange of existing life insurance policies into other qualifying life insurance or annuity contracts.