How are surrender charges deducted in a life policy with a rear end loan provision?

How does a Universal Life policy work?

Universal life (UL) insurance is a type of permanent life insurance policy with a built-in cash value accumulation fund that earns interest at a rate no less than the minimum rate guaranteed in the policy. Generally speaking, as long as your cash surrender value can support the ongoing monthly deductions, the premium you choose to pay is flexible.

How do I know how my Universal Life policy is performing?

The performance of your policy is impacted by several factors: the payments you make to the policy, the rates of return on your cash value, and the charges we deduct each month for the cost of insurance and any other expenses. It is important to note that monthly deductions can increase as you get older because charges, such as your cost of insurance, can increase.

Withdrawals and loans from your cash value can also impact whether your policy will remain active.  If your policy is ever at risk of lapsing, you will receive correspondence from us informing you of the actions needed to keep your policy active. Your annual statement will also provide you with the status of your policy as of the date of the annual statement.

How do I keep my policy active?

If your policy is active, that means your life insurance is in force and still in effect. Generally speaking, for your policy to remain in active status, the cash surrender value must be sufficient to cover the monthly deductions (which include the cost of insurance, the cost of any benefits provided by riders and any applicable expense charges). 

How do I know what my policy values are?

You can review your annual statement to view your values as of your last policy anniversary date. This statement will include your policy face amount, death benefit amount, loan value and your cash surrender value.

If you want to know your current policy values, please contact us or register at MetOnline to see if your values are available.

What can I find on my annual statement?

The annual statement is generated each year on the policy anniversary for policies that are in force. Typically, you can find common terms defined, your policy activity over the past year, your current policy values and how they were calculated. 

It’s important to examine your annual statement carefully, as it will provide key information on the status of your policy as of your anniversary date. It also projects how long your coverage will last, based on various hypothetical scenarios.

Why did I receive a grace/lapse notice?

At the time you purchased your policy, the premium you decided to pay was determined based on charges in place at the time of the sale as well as current and guaranteed rates of return and other assumptions. The cost of insurance charges increase with age and the rate of return on your cash value can also affect the cash value in your policy. Generally speaking, in order for the policy to remain in force, the cash surrender value must be sufficient to cover the monthly deductions.

In addition, if you missed any planned premium payments, made a withdrawal at some point, or took out a loan, this could negatively impact the cash surrender value under your policy. A low or declining policy cash surrender value may be an indicator that your policy is at risk of lapsing.

Why am I receiving a bill for an amount that is in addition to my normal billed premium?

If your policy is in jeopardy of lapsing, then you may have received a bill that was higher than your regular payment. That amount, labeled Premium Due to Retain Coverage, covers your regular monthly deduction that was due, plus the next two monthly deductions that will be due during the 61-day grace period. Generally speaking, your cash surrender value must remain sufficient to support the monthly deductions in order for your policy to remain active. We would suggest that if you received this type of notice you should contact us to discuss different things you can do now to help keep your valuable coverage in the future.

If my policy lapses, can I reinstate it?

If, at the time your policy lapses, you’re eligible to apply for reinstatement of your policy, you will receive a letter informing you of the amount needed to reinstate your policy and an application to request reinstatement. Your application must be returned to us along with payment of the amount due. This amount due will cover the next two monthly charges after the payment is received.

If your application for reinstatement is approved, you will need to pay your planned premium payments, and you may also need to increase your premium payments and/or reduce your amount of life insurance to retain your coverage. If your application for reinstatement is not approved or is incomplete, the amount paid for reinstatement will be refunded.

If you have misplaced this information, please contact us to learn about your current eligibility and the requirements to reinstate your coverage.

Information on withdrawal charges, surrender charges and loan interest (if applicable) can be found in your life insurance policy.

What happens when you surrender a life insurance policy with a loan?

How is the surrender charge determined?

What is a surrender charge on life insurance policy?

Who pays surrender value?