I’m looking for advice. My dad has had a life insurance policy with Baltimore Life for almost 40 years. The policy started with a $75,000 face value and a small yearly cash accrual. A few years ago, his agent passed away, and no one was really keeping track of his account. This week, a new agent from Baltimore Life called to tell him that by 2027, his policy will have no value neither cash nor face value. It will be void, and all the money he has paid over the years will be lost. The new agent explained that his original plan was “non-guaranteed” and that the yearly insurance cost was more than his monthly premium, which is why the policy lost value.
My dad is 65, and of course, expects to live beyond 2027 (God willing).
Now, he’s facing a situation where a new policy would be very expensive. He was paying less than $40 a month for the old policy, and now they’re quoting over $150 per month for just a $25,000 policy.
I have two questions:
Has he really lost both the cash and face value of his original universal life insurance? I understand the cash value could be used up by the cost difference, but I’m confused about why the face value will also disappear.
What can he do now? My parents are on a fixed income, so they can’t afford a $150 per month bill. The old policy only has about $1,400 in cash value left.
Thank you for reading this and for any advice or suggestions you have. I’m heartbroken watching them go through this. Their rep said they “fell through the cracks” and blamed them for not understanding the insurance terms. They weren’t treated kindly at all. They’re meeting with their financial advisor next week to see if he has any suggestions or knows a local life insurance specialist who could help.
Your father wasn’t paying enough to keep up with the rising cost of his insurance, so the cash value was used to cover the premiums. The face value will disappear because the policy will lapse without enough funding to stay active. It seems your father either didn’t fully understand how the policy worked or didn’t add enough funds.
This issue is quite common, and I deal with it often.
Honestly, it’s good that the new agent called to let him know. Has your father not received any notices from the insurance carrier? Has he been keeping track of the policy’s performance?
He can either withdraw the remaining cash value or use it to get a new policy, possibly a small whole life policy. Another option would be to start a savings account to cover future final expenses.
Unfortunately, there isn’t much good news here. The chance to save this policy was years ago, and now it’s too late.
Thanks for your response. I saw his most recent annual report, and it shows his premium is around $400 per year, while the insurance cost is about $900—clearly a shortfall. Could he pay extra to cover the higher cost and keep the face value intact?
Yes but that number will keep going up. He needs to pay much more than the cost of insurance to get ahead of the premiums for the UL policy to not become an ever increasing expense.
This is how universal life works—the cost of insurance goes up every year, and eventually, it exceeds the premium amount. This often happens after the guarantee period ends. When it does, the policy takes automatic loans to cover the difference, which means interest is charged upfront and keeps accumulating.
This will happen even without taking loans from the cash value; taking loans just speeds up the process.
You can easily determine when this will happen by checking the cost of insurance page in the policy.
Universal life policies often end this way, and unfortunately, your dad isn’t the only one. Many universal life policies lapse like this. There’s not much you can do now—your dad was let down by his agent years ago. The best step forward is to learn from this experience. If you currently have a universal life policy, consider doing a 1035 exchange into a whole life policy.
I wouldn’t just say “he got screwed”. There’s nothing wrong with universal life but it, like every contract, does need to be understood and it does need to be monitored more closely than other types of policies.
I guarantee you his annual statement says “projected in force until xx/xx/xxxx” for both current and guaranteed charges. He just didn’t read it.
Or maybe the original conversation was to only fund it to 67 as that’s a reasonable time to expect you don’t need life insurance anymore and I don’t think they had 40 year term 40 years ago.
There are fundamental issues with universal life if you understand the details. Look into how they were developed, read every line and disclosure, then compare those to whole life contracts and their guarantees.
He should be getting an annual statement for the policy, which shows the current values and compares them to last year’s. It also indicates the cost of insurance versus what is being paid. If the cost is higher than the payment, the policy is already declining. The previous agent would have been aware of this, honestly.
You shouldn’t get life insurance policies that build cash value unless you’re earning a lot and need them for tax planning. Have your dad cancel the policy and instead put the monthly premium into an investment that matches your risk tolerance.