If you received a letter raising the cost-of-insurance charges on your universal life policy, you are not imagining it and you are not alone — several major carriers raised COI scales on older in-force blocks during the 2010s and were sued in class actions over it. But a pending or settled lawsuit almost never freezes your bill, and you still have to decide what to do with the policy while the litigation grinds on. Treat the lawsuit and the policy decision as two separate tracks.
Cost of insurance is the monthly mortality charge a universal life carrier deducts from your account value. Your contract sets a guaranteed maximum COI scale and lets the carrier charge anything at or below it. For decades most carriers charged well under the maximum. When low interest rates and improving-then-stalling mortality squeezed those blocks, some carriers moved current COI rates toward the guaranteed ceiling — legal on its face, but the suits alleged the increases were driven by profit recovery rather than the factors the contracts permitted.
This page explains the mechanics, what the major cases actually established, how to read your increase notice, and how the realistic exits compare — including when staying put is still the right call.
In This Article
- How Cost of Insurance Actually Works
- What the Major Cases Established
- Reading Your Increase Notice Line by Line
- Get the In-Force Illustration Before You Do Anything
- Every Option Side by Side
- When a Settlement Fits a COI-Increase Policy — and When It Does Not
- What to Do This Month
- Frequently Asked Questions
How Cost of Insurance Actually Works
On a universal life policy, each month the carrier credits interest to your account value and then deducts a monthly charge. That charge equals the COI rate per $1,000 of net amount at risk, times the net amount at risk, plus expense and rider charges. The net amount at risk is the death benefit minus the account value — which means as your cash value erodes, the amount at risk grows, and the same COI rate produces a bigger dollar charge. That feedback loop is why a policy can go from stable to collapsing in a few years.
COI rates rise with attained age by design. What made the 2010s different was carriers raising the scale — the rate applied at every age — on policies already in force. Contracts typically permit a redetermination based on expectations of future mortality, investment earnings, persistency and expenses. The litigation turned on whether the increases were actually based on those factors. See our glossary entry on what cost of insurance means for the definition in isolation.
What the Major Cases Established
The best-documented outcome is Feller v. Transamerica Life Insurance Company, a California federal class action over 2015 monthly deduction increases on certain TransUltra and other universal life policies; the court approved a settlement of roughly $195 million in 2018. Similar suits followed against other carriers over increases on legacy universal life blocks — AXA Equitable’s 2015 increase on certain Athena UL II policies, and actions involving Lincoln National, John Hancock and Banner among others. Outcomes, classes and deadlines differ case by case, and several matters were still working through appeals and administration into the 2020s; confirm the current status of any specific case with class counsel or the court docket as of 2026.
The practical takeaway is narrower than the headlines. These suits generally did not establish that COI increases are illegal. They tested whether a particular increase was supported by the factors the specific contract allowed, and whether the notice given was adequate. Being in a class does not pause your premium obligation.
Reading Your Increase Notice Line by Line
Pull the notice out and look for four things. First, the effective date — increases usually take effect on a policy anniversary or monthiversary, which sets your decision clock. Second, whether the letter says the change is to the current COI scale and states that the guaranteed maximums in the contract are unchanged; that phrasing is nearly universal and tells you the carrier is operating inside the contract’s ceiling. Third, the new premium required to keep the policy in force to a stated age — if the letter does not give one, request it.
Fourth, look for the class-action notice, if any. Carriers under settlement obligations often mail separate notices with opt-out deadlines. Missing an opt-out deadline can bind you to a settlement, and opting out can preserve an individual claim — that is a decision for an attorney, not for this page.
| Question | What to Check | Why It Matters |
|---|---|---|
| Is the guaranteed maximum COI unchanged? | Increase letter + contract rate appendix | Shows how much further the carrier could go |
| Does the policy have a no-lapse guarantee? | Contract rider page | An intact guarantee may protect the death benefit regardless |
| What premium sustains the policy to age 95? | In-force illustration, guaranteed column | The real long-run cost, not the current-assumption number |
| Am I in a class action? | Separate class notice; class counsel | Opt-out and claim deadlines are hard deadlines |
| Would a face reduction fix it? | Carrier illustration at lower face | Cuts net amount at risk and the monthly deduction |
| Does the policy qualify in the secondary market? | Age, health, face amount, premium load | Determines whether a sale is even on the table |
Get the In-Force Illustration Before You Do Anything
The single most useful document in this situation is a current in-force illustration, and you are entitled to request one from the carrier at no charge. Ask for it two ways: at current assumptions and at guaranteed assumptions, and specifically ask for solves showing the annual premium required to carry the policy to age 90, 95 and 100. The gap between the current-assumption column and the guaranteed column is the exact size of the risk you are carrying.
Read what an in-force illustration is before you interpret it. Two traps: an illustration that shows the policy sustaining to age 100 on current assumptions may collapse at 82 on guaranteed assumptions, and an illustration solved to age 100 exactly leaves zero cushion. Order the document early — one to three weeks is normal turnaround.
Every Option Side by Side
Keep paying the higher premium. Rational when the death benefit is still needed and affordable, and especially when the insured’s health has declined since issue — that coverage would be expensive or impossible to replace.
Reduce the face amount. Because the monthly deduction is charged on the net amount at risk, cutting the death benefit cuts the COI dollar charge roughly proportionally. This is often the cleanest fix and it is reversible in the sense that you keep a policy.
Reduced paid-up or extended term. These nonforfeiture options are standard on whole life; on universal life the equivalent is usually a face reduction or a paid-up option if the contract offers one. See settlement versus reduced paid-up.
1035 exchange. IRC §1035 permits a tax-free exchange of the policy’s cash value into another life policy, an annuity, or a qualified long-term-care contract. Useful when the existing chassis is broken but you still want coverage or care funding.
Surrender pays the cash surrender value. A life settlement sells the contract for a lump sum, typically well above surrender value for qualifying policies.
When a Settlement Fits a COI-Increase Policy — and When It Does Not
COI-increase policies are, in fact, one of the more common profiles in the secondary market: older insured, large face amount, and a premium that suddenly stopped making sense. Buyers price on life expectancy and future premium load, and the GAO’s market study (GAO-10-775) found typical proceeds of about 10% to 35% of face value, roughly 4 to 8 times cash surrender value.
It is the wrong answer in three situations. If you are a plaintiff or class member with a live claim, selling the policy can affect standing or your share of relief — ask class counsel first. If the policy is a guaranteed universal life contract with a no-lapse guarantee still intact, the increase may not threaten the death benefit at all. And if beneficiaries still depend on the coverage and the new premium is payable, keeping it usually wins. Our page on universal life cost increases covers the affordability angle in more depth.
What to Do This Month
Order the in-force illustration today; it is the long pole. While you wait, locate the original contract and find the guaranteed maximum COI table — usually an appendix of rates per $1,000 by attained age — so you can see how much headroom the carrier still has. Ask the carrier, in writing, for the specific contractual provision authorizing the change and for confirmation of the current and guaranteed scales.
If a class notice is involved, calendar the opt-out and claim deadlines immediately and take them to an attorney; nothing on this page is legal advice. Then, and only then, compare the alternatives with real numbers rather than fear. A policy in force keeps every door open; a lapsed policy closes most of them. If part of that comparison is knowing what the contract might be worth in the secondary market, a review is free and carries no obligation.
If you want a plain-English read on what your contract actually says, Pine Lake Life Solutions offers a free, no-obligation policy review. Send the policy cover page — the first page showing the insurer, policy number, face amount and issue date — or call (305) 209-7183. This page is general education, not legal, tax or investment advice, and Pine Lake is not affiliated with your insurance carrier.
Frequently Asked Questions
Are cost-of-insurance increases legal?
Generally yes, within limits. Universal life contracts set a guaranteed maximum COI scale and allow the carrier to charge at or below it, subject to redetermination standards written into the contract. The class actions tested whether specific increases were supported by those permitted factors, not whether increases are inherently unlawful.
Does joining a class action stop my premium from going up?
No. Litigation almost never suspends the carrier’s billing, and your policy can still lapse while a case is pending. Handle the policy decision on its own timeline and the legal claim separately with an attorney.
What was the Transamerica COI settlement?
Feller v. Transamerica Life Insurance Company was a California federal class action over monthly deduction increases announced in 2015 on certain universal life policies; the court approved a settlement of roughly $195 million in 2018. Terms, eligible policies and administration details are specific to that case — confirm the current status with class counsel.
Should I surrender a policy that got a COI increase?
Surrendering pays only the cash surrender value, which on a COI-battered universal life policy is often small. Before surrendering, price a face-amount reduction, a 1035 exchange, and a secondary-market review. Surrender is usually the lowest-value exit of the ones available.
Can I sell a policy that is the subject of a class action?
Often yes, but ask class counsel first, because transferring ownership can affect who holds the claim and who receives any settlement relief. Buyers will also want to know the litigation status. Do not assume the two are unrelated.
My policy has a no-lapse guarantee — does a COI increase matter?
If the no-lapse guarantee is intact, the death benefit is generally protected as long as you make the required premium payments exactly on schedule. Missing or shorting a payment can permanently damage a guarantee, so verify the guarantee status with the carrier before changing anything.
What documents do I need to evaluate my choices?
The policy contract, the last two annual statements, the increase notice, and a current in-force illustration at both current and guaranteed assumptions. To find out whether the policy is a secondary-market candidate, the cover page alone is enough for a free review.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- What Is Cost Of Insurance
- What Is An In Force Illustration
- Life Settlement Vs Reduced Paid Up
- Universal Life Cost Increases
- Premium Notice Doubled
- What Is A No Lapse Guarantee
- What Is Guaranteed Universal Life
- When A Life Settlement Is A Bad Idea
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.