Will the market cost you your insurance?

LOS ANGELES Even if you don't have investments or a retirement account, you could be deeply affected by the downturn in the economy because your life insurance policy is also tied to the stock market and interest rates. And one day you could get a bill for your insurance premium that could cost you hundreds of dollars more than you were paying.

At 80 years old, Richard Seiden is enjoying life with his friends and he's still working. But as healthy as he is, that didn't stop him from getting a life insurance policy, a policy he thought would give his heirs a guaranteed benefit because he trusted the agent who sold it to him.

"That's why you have an agent. You think they're going to take care of you. You pay for it, and they protect you. That's not the way it's turning out," said Richard.

When Richard had another agent look at the policy he got just seven years ago, he was absolutely stunned to find out his premium

Had jumped from $800 a quarter to more than $2,300. And if he didn't pay it, the policy would lapse.

"Who ever dreams dreams of quadrupling or tripling your payments like that? All at one time?" asked Richard.

According to Richard's new agent, Brian Gilder, what happened to Richard could happen to anyone who doesn't have a guaranteed policy.

"Every day policies are in danger of lapsing. I've seen many stories happen where policies just lapse, and people don't even know it. I call it, unfortunately, a ticking time bomb waiting to happen," said insurance agent Brian Gilder.

Brian says a ticking time bomb happens more often with variable life and universal life policies, but it could happen with most any policy.

You see, insurance benefits are often tied to interest rates and other investments. If those investments go down then the policy might be worth less than when you bought it. And in this economy that's what happened to Richard.

"As time has gone on with this policy, the interest rates have declined on the client, and so what's happened is the premium he's paying into his policy is not sufficient to cover his death benefit," said Brian.

So buyers of life insurance need to ask questions and read the fine print.

"I think many people can really benefit by looking at their annual statement. Every year, many people receive these annual statements, and either they look at it real quickly, or they will just file it away. Just because you're paying a premium, doesn't mean in the future you won't be paying more premiums," said Brian.

Richard and Brian are now trying settle with the insurance company but Richard may have to take a lower death benefit or sell the policy, or even get a new policy altogether. All of the options will cost him in some way or another.

If you're in the market for a life insurance policy, be sure to ask if the benefit and the premium are guaranteed.

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