July 30, 2026
4:41 pm

Universal Life Costs Keep Rising: Why Your Premium Doubled — and What to Do

If the premium needed to keep your universal life policy alive has doubled — or your cash value is draining faster than your statements ever projected — you are not imagining it, and you are not alone: carriers raised cost-of-insurance (COI) rates on many older universal life blocks after years of sustained low interest rates undermined the assumptions those policies were built on. Policies illustrated in the 1980s and 1990s assumed crediting rates that the low-rate era never delivered. When credited interest fell short for decades, cash values grew slower than projected, and several insurers responded by raising the internal charges deducted from those cash values.

These increases hit hardest at older ages, because COI charges scale with the insured’s age. Past age 80, the annual cost of insurance inside a universal life policy can exceed what the policy was originally illustrated to cost in total — turning a “flexible premium” product into a policy demanding checks its owner never planned for. COI increases at several major carriers, including Transamerica, John Hancock, and Lincoln, became the subject of policyholder litigation over the past decade; the status and outcomes of those cases vary and should be verified for any current specifics.

This guide explains the mechanics in plain English, lays out every realistic option, and shows why the owners squeezed hardest by COI increases — insureds in their late 70s and 80s — are often exactly the profile the life settlement market pays the most for.

In This Article

How Universal Life Was Supposed to Work
What a Cost-of-Insurance Increase Actually Is
Why the Squeeze Is Worst After 80
The Litigation Backdrop — and Why It Should Not Drive Your Decision
Your Full Menu of Options, Ranked Honestly
Why COI-Squeezed Policies Are Prime Settlement Candidates
What to Do This Week
Frequently Asked Questions

Universal Life Costs Keep Rising: Why Your Premium Doubled — and What to Do

How Universal Life Was Supposed to Work

Universal life separates a policy into two moving parts: a cash value account that earns credited interest, and monthly deductions — cost of insurance plus administrative charges — that pay for the death benefit. The pitch was flexibility: pay more when you can, less when you cannot, and let the interest earnings help carry the policy. Illustrations from the 1980s and 1990s often projected crediting rates of 8% or more, showing policies that would eventually sustain themselves.

The design has a hidden dependency: it works as illustrated only if credited interest stays near the illustrated rate and internal charges stay near the original scale. Neither held. Crediting rates on older policies fell toward their contractual minimums during the long low-rate era, and cash values that were supposed to compound and cushion rising charges never got the chance.

What a Cost-of-Insurance Increase Actually Is

The COI charge is the amount deducted from your cash value each month to pay for the pure insurance protection. Contracts specify a guaranteed maximum scale and a lower current scale that carriers actually charge — and reserve the right to move current rates up toward the guaranteed maximum under defined conditions. That reserved right is what several carriers exercised on older blocks of business.

You may never have received a bill for the increase, because COI comes out of cash value silently. The symptoms show up instead: an annual statement showing cash value falling despite premium payments, a carrier letter warning the policy will lapse without much larger premiums, or an in-force illustration showing the policy collapsing years earlier than expected. If any of these has arrived, request a current in-force illustration immediately — it is the document that tells you what keeping the policy actually costs from here. Our companion page on why universal life premiums are rising covers the mechanics in more depth.

Why the Squeeze Is Worst After 80

COI rates are age-banded: the charge per thousand dollars of coverage rises every year, steeply at advanced ages, because it tracks mortality risk. A COI scale increase therefore lands as a percentage hike on an already fast-rising base. For an insured in their mid-80s, monthly deductions can consume tens of thousands of dollars a year on a mid-size policy — annual costs that can exceed what the entire policy was originally illustrated to require.

This creates the bitter arithmetic many families face in 2026: the policy is worth the most to beneficiaries precisely when it is most expensive to keep. Owners who paid faithfully for thirty years find themselves funding an accelerating cost curve on a fixed income, with the cash value cushion — the thing that was supposed to absorb this — already depleted by the same charges.

Option	What It Does	Cost / Trade-Off	Best When
Keep paying full freight	Preserves the full death benefit	Rising COI at advanced ages; verify worst case with a guaranteed-assumption illustration	Beneficiaries need the benefit and the budget can absorb it
Reduce face amount	Cuts COI charges proportionally	Permanently smaller death benefit	Partial coverage still matters and full premiums do not fit
Loan / cash value bridge	Buys time without out-of-pocket premiums	Loans compound; accelerates eventual collapse	Short bridge to a planned decision, not a strategy
Surrender	Immediate check for remaining CSV	CSV often depleted by the same COI charges; irreversible	Small remaining value, no settlement interest
Life settlement	Market bid; buyer takes over all premiums	Taxable above basis; 60–120 days; death benefit goes to buyer	Insured 75+, $100k+ face, premiums no longer sustainable
Lapse	Nothing	Total loss of decades of premiums	Effectively never — price the alternatives first

The Litigation Backdrop — and Why It Should Not Drive Your Decision

COI increases on older universal life blocks led to class-action litigation against several major insurers over the past decade — Transamerica, John Hancock, and Lincoln were among the carriers sued, with some matters producing settlements and others still working through the courts. The current status of any particular case should be verified before relying on it. If your policy was part of a certified class, you may have received notices; read them, and ask your attorney what they mean for you.

But a possible future class recovery is not a plan for a policy lapsing now. Litigation timelines run years; grace periods run weeks. Whatever the courts eventually decide, your near-term decision is the same: keep funding the policy, restructure it, or exit it on the best available terms. If your policy is with one of these carriers, our carrier pages — including Transamerica, John Hancock, and Lincoln Financial — cover the settlement angle for each. Pine Lake is not affiliated with any carrier.

Option one: keep the policy and pay the higher cost — right when beneficiaries genuinely need the death benefit and the budget can absorb it; an in-force illustration at guaranteed assumptions shows the true worst case. Option two: reduce the face amount — most UL contracts allow it, cutting COI charges proportionally; the coverage shrinks but survives. Option three: use remaining cash value or a policy loan to carry premiums — a bridge, not a fix, since loans compound against the policy. Option four: surrender for the remaining cash surrender value — often disappointingly small precisely because COI charges have been draining it. Option five: sell the policy in a life settlement.

The exits rank by dollars: a lapse pays nothing, surrender pays the depleted floor, and a settlement pays a market bid — historically 10% to 35% of face value per federal GAO research, roughly 4 to 8 times surrender value on average. The full ranking logic is in lapse vs. surrender vs. settlement.

Why COI-Squeezed Policies Are Prime Settlement Candidates

Here is the counterintuitive part: the same profile that makes a policy painful to keep makes it valuable to sell. Settlement buyers pay the most for policies on insureds in their late 70s and 80s with larger death benefits — exactly the demographic COI increases squeeze hardest. The buyer prices the death benefit against the premiums remaining, and prices the rising COI curve into its bid; what breaks a retiree’s budget is a manageable, fully modeled cost for an institutional owner.

Timing matters enormously. A settlement requires the policy to be in force through a 60-to-120-day process, and a policy that has drained its cash value is on a countdown. If a lapse warning has arrived, the highest-return move is often paying enough premium to keep the policy alive while it is priced — spending a few thousand dollars to preserve an asset that may bid in five or six figures. See what policies qualify for the screen buyers apply.

What to Do This Week

First, call your carrier and request a current in-force illustration run two ways: at current charges, and at guaranteed maximum charges. This is free and shows exactly when the policy fails under each scenario. Second, note your grace-period status if a lapse notice has arrived — the date drives everything. Third, get a market read before making any irreversible move: send the policy’s cover page for a free policy review, and a specialist can tell you whether the policy is a realistic settlement candidate and what range similar policies have seen.

There is no cost and no obligation, and every other option — paying, reducing, surrendering — remains open while you look. Call (305) 209-7183 or start in our Education Center. The one unrecoverable mistake is letting a COI-squeezed policy quietly lapse with a market bid never sought.

Frequently Asked Questions

Why did my universal life premium suddenly double?

Most likely your carrier raised cost-of-insurance rates on your block of policies, and/or decades of low credited interest left your cash value too small to help carry the charges. COI deductions rise steeply with age, so increases land hardest on policyholders in their late 70s and 80s. An in-force illustration from your carrier will show exactly what is happening.

Can insurance companies legally raise cost-of-insurance charges?

Generally yes, up to the guaranteed maximum scale printed in the contract, when done according to the contract’s terms. Whether specific increases followed those terms is exactly what policyholder lawsuits against several major carriers have contested. Your contract’s guaranteed COI table shows the worst case the carrier could ever charge.

Which carriers raised COI rates on older policies?

Cost-of-insurance increases on older universal life blocks led to litigation involving several major insurers over the past decade, including Transamerica, John Hancock, and Lincoln, among others. Case statuses and outcomes vary and should be verified for current specifics. An increase does not mean your carrier is failing — and it does not change your policy’s value in the secondary market.

Should I wait for a class-action recovery instead of deciding now?

Waiting is only viable if the policy stays in force, and COI-squeezed policies are often on a countdown to lapse. Litigation runs years; grace periods run weeks. Make the keep-restructure-or-exit decision on the policy’s current economics, and treat any future class recovery as a separate matter for your attorney.

My cash value is almost gone. Is it too late to sell?

Often not — settlement buyers price the death benefit against future premiums, not the remaining cash value, so a low-cash-value policy on an older insured can still command a real bid. But the policy must stay in force through the 60-to-120-day process. If a lapse notice has arrived, act immediately; paying one more premium to keep a saleable policy alive is usually money well spent.

Would reducing my face amount hurt a future settlement?

Yes, it can. Buyers bid on the death benefit, so cutting a $400,000 policy to $200,000 roughly halves what they are pricing. If a sale is even a possibility, get the policy valued at its full face amount first — the review is free and does not commit you — and only then decide whether to reduce, keep, or sell.

How much could a COI-squeezed policy sell for?

Federal GAO research found sellers historically received 10% to 35% of face value, roughly 4 to 8 times cash surrender value on average. Older insureds tend toward the stronger end because fewer premium years remain for the buyer. No one can quote your policy without reviewing it — which is what a free policy review is for.

What documents do I need to explore a sale?

Start with just the policy’s cover page — insurer, policy number, face amount, issue date. For full pricing, buyers will want a current in-force illustration and recent statements, plus authorization to review medical records for life expectancy purposes. Request the in-force illustration from your carrier now; it is useful for every option on your menu. Call (305) 209-7183 to begin.

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.

Call (305) 209-7183 · Request a review online →

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