Confronting Underfunded Universal Life
July 6, 2021 by Robin S. Weinberger and Peter N. Katz
The current extended period of historically low interest rates has left many universal life policies in deep trouble. No one foresaw the current low interest rate environment and so universal life policies without secondary guarantees, that were funded based on prevailing interest rates at the time of purchase, are now drastically underfunded.
Further compounding the problem is that a number of insurance companies have increased cost-of-insurance charges to make up for the losses they are taking on having to credit policies with their interest rate guarantee.