A. It's never a good action to take for a life insurance company raises an existing policy's premium. However, it's happening now, for several main reasons as below:
- The insurers' expected future investment return is lower than originally projected
- The insurers' current and expected expenses are higher than originally projected
- The insurered's mortality expectation rises above original assumption
If you are a policyholder and received a notice from your insurer for the bad news, here are the actions you should take as well as some options you could pursue:
1. Review Your Policy
The first action is to take out your copy of the policy and review the section that discusses the insurer's ability to raise rates. You might have a luck here if your contract prohibits such a rate rise, but chances are the life insurer's lawyers have already done that and found they could raise your premium, before sending you the letter.
2. Join a Class Action
The second action is to see if there is any class action has been filed against the insurers and consider joining it. However, don't count too much on that front either.
3. Find Money to Pay
The third action is to look around and see if you have any spare money sitting on saving or CD earning little. It's time to move those money to your permanent policy to meet this premium increase needs and potentially earn a little higher yield than saving or CD.
4. Look For Alternatives
The fourth action is to look for alternatives, which there are several -
- If you are still in good health, you could shop around and see if there is any better and similar product out there.
- You could keep this policy but by lowering its coverage amount with lower premium requirement
- You could do a 1035 exchange to an annuity if you don't need the life insurance protection anymore
- You could sell your policy at a greantly discounted price if you no longer needs it or could afford it anymore