Increased Cost of Insurance

This is another announcement in a series of announcements disclosing increases in COI’s (cost of insurance charges).  These policies were all issued by Aetna with Lincoln Life & Annuity Company of New York as the administrative agent and reinsurer for the policies between the years 1983 and 2000.  Details are as follows:

  • The COI increase is effective June 1, 2016.
  • The COI changes comply with the terms of the contracts.
  • These changes do not impact any life policies issued by Lincoln.
  • These COI increases are the result of material changes in future expectations of key cost factors associated with providing this coverage, including lower investment income and higher reinsurance costs.
  • The changes are being made only after an in-depth actuarial analysis and rigorous review process.
  • These products remain meaningful solutions with competitive guaranteed credited interest rates. However, the increased COI charge will increase the monthly deduction, which will lower the policy’s future cash value and may shorten the length of time the policy will stay in force without increased premiums. As a result, some clients may lose their life insurance coverage unless they choose to make policy changes.
  • Policyholders have several potential options to continue to meet their insurance needs, including:
    • continuing to pay the current planned periodic premium for a potentially shorter coverage period and/or reduced policy Cash Value
    • paying additional premiums;
    • reducing the specified face amount (subject to any minimum requirements or IRS rules);
    • 1035 exchanges
    • Policyholders also have the option to surrender or sell their policy.

Numerous carriers have made this difficult decision and many more will continue to follow suit based on our current industry environment.  Recent announcements have been made by; Transamerica, AXA, VOYA, Banner, US Life. This announcement is a reminder of the importance of monitoring life insurance on a regular basis.

-John Ruggiero

Chief Marketing Officer

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