
Universal life insurance is especially vulnerable to low interest rates. Since universal life insurance policies were designed to earn tax-exempt interest, many people choose to pay their policy premiums out of the cash value of the account. When interest rates are low, however, these policies run the risk of draining the account, causing either a major increase in premium payments or a lapse in payments and a cancellation of the policy altogether.
An article published in the New York Times entitled, “Why Some Life Insurance Premiums Are Skyrocketing,” does a great job of explaining how your policy is being affected by record low interest rates nationwide.
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