Happy 100th Birthday! There Goes Your Life Insurance

The following in an excerpt from an article that appeared in the Wall Street Journal, July 21, 2017, print edition as “This Life Insurance Isn’t So Permanent”.

Gary Lebbin

Gary Lebbin will be turning 100 and Transamerica has told him his life insurance policy will be terminated. PHOTO: LEBBIN FAMILY

Age limits are increasing problem for life-insurance industry

When Gary Lebbin turns 100 years old in September, hanging over any celebration will be one very costly fact: His life insurer aims to cancel two policies totaling $3.2 million in death benefits.

The Lebbin family has run up against a provision that exists in many life-insurance policies. Policies have expiration dates, and the one in the Lebbin family’s two contracts is age 100 for the policyholder. It is a standard feature of permanent life insurance, a product combining a taxdeferred savings component with a tax-free death-benefit. The provision calls for the termination of the death benefit and payout of all of the built-up savings when the policyholder reaches the specified age.

The limits weren’t an issue in the many decades when very few people lived beyond 100. But they increasingly are a problem for the U.S. lifeinsurance industry as more people become centenarians. There were an estimated 53,364 centenarians in the U.S. as of 2010, up from 37,306 in 1990 and 32,194 in 1980, according to a U.S. Census report published in December 2012. Since the mid- to late-2000s, the industry has used age 121 as the standard maturity date in new contracts. But an unknown number of older contracts with the 100-year-old limit remain in consumers’ hands. Some insurers previously offered older policyholders the opportunity to extend the age in their older policies with varying financial terms. The Lebbin family’s insurer, a unit of Transamerica Corp., didn’t offer an extension.

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