Risky risk management- life insurance policies can face cancellation if policyholders don't pay more.
In the next few years, millions of savers are in for a surprise that could cost them tens of thousands of dollars now—or hundreds of thousands later.
The reason: Universal-life insurance policies bought years ago when interest rates were high will face cancellation if policyholders don't pay more.
If interest rates stay low, many policyholders will face the unhappy choice of kicking in more money, accepting a lower death benefit or walking away, possibly sacrificing years of premiums they already paid.
Many people are "sitting on a ticking time bomb," says Kenneth Himmler, president of Integrated Asset Management, an advisory firm in Los Angeles. About 70% of the new clients whose insurance coverage he reviews are facing higher out-of-pocket costs because policies aren't generating enough interest income to pay costs, he says.