Can You Sell a Pekin Life Universal Life Policy? (2026)

Flexible premium means the carrier is not promising anything about premium

A universal life policy is an account, not a payment plan. Premium you pay goes into the account value after a premium load. Every month the carrier deducts a cost of insurance charge, a per-thousand charge, an administrative fee and any rider charges. Interest is credited at a declared rate, subject to a guaranteed minimum stated in the contract. When account value can no longer cover the monthly deduction, the policy enters its grace period and then lapses.

The premium you were quoted at issue was a planned premium — a number chosen so that, under the assumptions on that day, the account value would hold up for as long as the illustration showed. It was not a contractual amount. Two things then made it inadequate for a great many policies sold in the 1990s and 2000s.

First, declared crediting rates fell. A policy designed around 7 percent credited interest and now crediting near its guaranteed minimum of 3 or 4 percent accumulates far less than the design assumed. Second, some carriers raised cost of insurance rates on in-force blocks within the guaranteed maximums their contracts permitted.

Neither is a breach of anything. The contract always allowed both. But the combination means a policy funded exactly as instructed for thirty years can still be scheduled to lapse in the insured’s early eighties. Our overview of how universal life works covers the account mechanics in more detail.

The cost of insurance curve is what actually breaks these contracts

Cost of insurance is a rate per thousand dollars of net amount at risk — death benefit minus account value — and it rises with the insured’s attained age. Gently through the sixties. Steeply after seventy-five.

The trap is compounding. If account value underperformed, the net amount at risk stays large, so the rising rate is applied to a bigger base each year. A policy deducting $240 a month at age sixty-three can be deducting $3,200 a month at eighty-five on the identical face amount. Once monthly deductions exceed the interest credited, account value starts declining, which enlarges the net amount at risk further, which raises next month’s charge. The failure accelerates.

What to look for on your statement: three consecutive years of declining account value while premium is still being paid, or a projected lapse date printed anywhere on the annual report. Either is a signal to act rather than wait. Detail on the charge itself is in our explainer on cost of insurance.

Also locate any outstanding policy loan and its accrued interest. Loans reduce settlement proceeds dollar for dollar, and a lapse with a loan outstanding can generate a taxable event on income the owner never actually received — one of the harshest outcomes in the product and a strong argument against simply stopping payment.

The no-lapse guarantee: valuable, and easier to break than you think

Many universal life contracts include a secondary guarantee, often called a no-lapse guarantee, that keeps the death benefit in force even if account value falls to zero — provided a specified premium test is satisfied.

Understand the mechanism, because it is not intuitive. The guarantee is typically tracked through a separate shadow calculation that runs alongside the actual account value, using its own credited rate and its own charges. If the shadow value stays positive, the guarantee holds. It is entirely normal for a policy’s real account value to be near zero while the guarantee is intact and the death benefit is fully secure.

Now the fragility. On most forms, the test depends on premiums being paid on time and in full. Paying late — even within the grace period — or paying short in a single year can permanently reduce or void the guarantee, and on many contracts catching up afterward does not restore it. Some forms allow a catch-up with interest within a limited window; many do not. Owners discover this years later when a carrier letter arrives explaining that the guarantee lapsed in a year they barely remember.

If your policy has a secondary guarantee, ask the carrier in writing for three things: whether the guarantee is currently in force, the exact date it is guaranteed to, and the precise premium required to maintain it. Read how no-lapse guarantees work before you make any change to your payment pattern.

Warning sign	What it usually means	Act by
Account value declining three years running	Monthly deductions exceed credited interest	Now — the decline accelerates
Carrier letter requesting additional premium	Projected lapse is inside the illustration horizon	Before the grace period ends
A missed or late premium on a no-lapse guarantee	The guarantee may already be impaired	Immediately; catch-up windows are short
Cash surrender value far below account value	Still inside the surrender charge period	Ask for the year it reaches zero
Loan balance approaching account value	A lapse could trigger taxable phantom income	Before any decision to stop paying

Grace periods, lapse notices, and reinstatement

When account value cannot cover a monthly deduction, the policy enters a grace period — commonly 31 days on universal life forms, longer in some states. The carrier must send notice. If the required amount is not paid by the end of the grace period, the policy lapses.

Two practical points. First, lapse notices go to the address of record, and the single most common cause of an unintentional lapse is a stale address after a move or a move into assisted living. Many states now require carriers to permit an annual designation of a secondary addressee to receive lapse notices; if your state allows it, name an adult child or your attorney and do it in writing.

Second, reinstatement is often possible within a defined window — frequently three to five years — but it usually requires evidence of insurability plus payment of back premium with interest. For an insured whose health has declined, evidence of insurability is exactly the thing they cannot supply, which is why a lapse is often permanent in practice even when it is theoretically reversible. And a reinstatement generally restarts a two-year contestability window, which makes the policy unmarketable to buyers until that window closes.

If you are receiving lapse notices right now, our page on what to do when a policy is lapsing lays out the immediate steps in order.

The documents that let you decide

One letter to the carrier, four requests:

1. In-force illustration, current premium, guaranteed assumptions. Guaranteed maximum cost of insurance and the guaranteed minimum crediting rate. Read the projected lapse year and compare it against a realistic life expectancy.
2. In-force illustration, premium required to carry the policy to age 100 or 121. This is what keeping the coverage genuinely costs, and it is what any offer should be compared against.
3. No-lapse guarantee status. In force or not, the date it runs to, and the premium required to maintain it.
4. Net cash surrender value plus any loan balance with accrued interest, and the year the surrender charge reaches zero.

With those four in hand the decision usually makes itself. The in-force illustration is the document that separates arithmetic from guesswork, and no responsible analysis proceeds without it.

For Illinois-delivered policies, a settlement transaction runs under the Illinois Viatical Settlements Act at 215 ILCS 158, administered by the Illinois Department of Insurance. If your policy was delivered in Indiana, Iowa, Ohio or Wisconsin, that state’s act governs instead — the transaction follows the delivery state, not the carrier’s domicile.

Four exits, and which one usually wins

Reduce the death benefit. Because cost of insurance is charged on net amount at risk, cutting the face amount cuts the largest monthly charge immediately and costs nothing out of pocket. If the family now needs $250,000 rather than the original $500,000, this frequently restores solvency for a decade. Ask for the illustration before considering anything else. Compare against the settlement alternative.

Surrender. Fast and certain. Past the surrender charge period the net figure can be better than expected, and on a policy with real account value it may exceed any bid. Gain above basis is ordinary income; ask your tax preparer.

Sell. Realistic when the insured is roughly sixty-five or older with meaningful health history, the face amount is $100,000 or more, and the policy would otherwise lapse or surrender for far less than a buyer would pay. The comparison that matters is a firm offer against net surrender value, never against face amount.

Lapse. Almost always the worst result. Decades of premium produce nothing, and with a loan outstanding it can produce a tax bill on top.

Pine Lake Life Solutions provides education and a free policy review. Pine Lake does not purchase policies and we are not licensed in every state. Send the policy cover page and the guaranteed-basis in-force illustration and we will tell you which of these four your contract actually supports.

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Frequently Asked Questions

Does Pekin Life offer universal life insurance?

Yes. Universal life is part of Pekin Life’s individual life shelf alongside term and whole life, sold with Medicare supplement, annuity and pre-need coverages. We could not confirm the specific current universal life product names as of 2026, so read the policy form number off your cover page and reference it when you write to the carrier for an in-force illustration.

I paid exactly what I was told for 30 years. Why is the policy failing?

The quoted amount was a planned premium based on the assumptions in effect at issue, not a contractual obligation of the carrier. Declared crediting rates fell across the industry, and some carriers raised cost of insurance rates within the guaranteed maximums their contracts allow. Both were permitted by the contract, and together they leave many faithfully funded policies scheduled to lapse.

Can one late payment really void a no-lapse guarantee?

On many contracts, yes. Secondary guarantees are typically tested through a shadow calculation that depends on premiums being paid on time and in full. Paying late, even within the grace period, or paying short in a single year can permanently reduce or void the guarantee. Some forms allow a catch-up with interest within a limited window; many do not. Ask the carrier in writing.

My account value is nearly zero. Is the policy already dead?

Not necessarily. If a no-lapse guarantee is in force, the death benefit can be fully secure even with account value at or near zero, because the guarantee is tracked separately from actual account value. Ask the carrier for three specifics in writing: whether the guarantee is currently in force, the exact date it runs to, and the premium required to maintain it.

If the policy lapses, can I get it back?

Sometimes, within a reinstatement window that is often three to five years, but reinstatement usually requires evidence of insurability plus back premium with interest. For an insured whose health has declined, evidence of insurability is precisely what they cannot supply. A reinstatement also generally restarts a two-year contestability window, which keeps the policy unmarketable to buyers until it closes.

What is the cheapest way to keep the coverage alive?

Usually reducing the face amount. Cost of insurance is charged on the net amount at risk, so cutting the death benefit cuts the largest monthly deduction immediately at no out-of-pocket cost. If the family now needs half the original coverage, this often restores solvency for years. Request that illustration before evaluating a surrender or a sale.

Related Reading

• What Is Universal Life Insurance
• What Is Cost Of Insurance
• What Is A No Lapse Guarantee
• Policy Lapsing What To Do
• What Is An In Force Illustration
• Life Settlement Vs Lowering The Death Benefit
• Lapse Vs Surrender Vs Settlement
• Sell My Pekin Life Whole Life Policy
• Sell My Pekin Life Term Life Policy

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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.