What percentage of universal life policies are surrendered back to the insurance company or allowed to lapse?
A staggering 90% of universal life policies are allowed to lapse. Universal life insurance has been, and continues to be sold using optimistic examples of future interest rate returns on the “investment” portion of the policy. These optimistic interest rates often have not materialized. Further, these are usually not policies with level premium payments. The annual increase in premium to cover the ever-increasing annual death benefit charge is, on average, 10% per year. The issuing insurance company usually allows the policyowner to reduce the annual policy premiums to a more tolerable level, but charge this “savings” against the cash value of the policy. Over time, this premium reduction erodes the policy’s cash value to the extent that universal life insurance policyowners often find themselves in a position that they are either unwilling or unable to pay the constantly increasing premium cost to keep the insurance in force and will simply allow the policy to lapse. Universal life po
