When you buy an insurance policy, especially life insurance, the hope is that you make payments during its lifetime and, eventually, either you or your family will be able to reap the benefits. One of the big problems senior citizens are facing today, however, is impractically high premiums for policies up to 30 years old.
According to the Wall Street Journal, universal life is one type of policy that is causing major problems for many holders. In fact, the paper reported that these type of policies made up over 25% of all individual life insurance sales in the 1980s.
The main issue with these policies is that they are not covering the expenses they were projected to, and instead leaving large premiums that the insurance holder is expected to pay annually. Years of low interest rates are one of the biggest factors that led to this conundrum.
What many people don’t realize is that keeping artificially low interest rates has been the policy of the Federal Reserve for the many years. Former Chairman Ben Bernanke long argued for the benefits of such a policy. Unfortunately, as with the majority of government manipulated policies, this has led to failure. Our oldest generation is now left to pay the brunt of it.
MarketWatch.com reported on the problems these life insurance policies are having and one possible solution many holders are turning to — namely, selling the policy on the secondary market.
Nicholas Vertullo, a retired high-school teacher, found himself paying almost $30,000 annually on his policy at the age of 82.
“Laying out this kind of money is a hell of a thing for a fellow living on a pension and Social Security,” he said. “I should have been wiser, but sadly I wasn’t.”
Retirees who opt for selling fixed annuities may not suffer as Vertullo did, but it’s important for them to do their research before making any major financial decisions.