I was told that I retained access to the funds in my universal life insurance policy, but that's not true

[wasumaad]

About 4 years ago, I was sold a $750k universal flex life insurance policy as a supplemental retirement policy in Florida. I received misinformation about several things, but the main issue is that I was told that I retained access to the funds. I've recently learned that is untrue.

I emailed the insurance agent before the second premium payment to ensure that I thoroughly understood the policy, as the numbers appeared different than expected. He confirmed by email that I had tax-free access to the money at any time.

In reality, I currently only have access to the surrender value (about 6-7% of the deposited amount). When I spoke with the agent back in March, he initially denied sending the email, then said he was only referring to the surrender value.

I contacted the issuing company and was told that my best option was changing the policy to a lowered face value/$0 premium. According to an illustration, that would allow me to withdraw the deposited fund amount in about 16 years at current interest rates.

I believe I've exhausted my options, as I've contacted the company the agent worked for, the company that issued the policy, and the state's division of consumer services. (Florida does not have a standalone insurance commission.) The only thing that resulted was the issuing company removing the agent's name from the policy without being asked.

Is it worth pursuing this in any other way, or would it be better to accept the possibility of receiving the funds (~18k) back in ~16 years? And would I actually be likely to receive the funds back (or a decent portion) if I waited the 16 years? I was laid off due to COVID, so I would probably only feel comfortable pursuing legal assistance if there was a contingent agreement. I really appreciate your advice!

 

[reana]

@wasumaad Ahhhhhh, universal life. Unfortunately you don't have much recourse here because it is on you to read the policy and fully understand what you have. Sorry.

 

[wasumaad]

@reana I thought that might be the case.

 

[tabinek]

@wasumaad Did Florida respond to your inquiry in any way? Do you still retain proof of the misinformation, in writing, from the agent?

 

[wasumaad]

@tabinek I did receive a response, though the first inquiry was lost by the state. It was a form letter that included three sentences of findings. It essentially just said that the insurance company confirmed I had received a copy of the policy and statements, and that I was told the policy was meant as a mid-to-long term investment.

The email (that the letter was attached to) stated I could reply with any questions. I did but only received back a consumer satisfaction survey.

I do still have the email from the agent about retaining access to the funds at any time. I had included it with the inquiry to the state but it was not addressed in the response.

 

[sonriseforever]

@wasumaad You can't take a policy loan?

 

[wasumaad]

@sonriseforever I can only loan about $990. Interestingly, the agent had said back in February that I could loan the full accumulated value tax-free (over $15k), citing that as a "built-in benefit" which was a workaround for the surrender value, and that I never needed to pay it back as it would just be deducted from the death benefit. A couple of weeks later, by email, he then said that I could loan about 90%. But then he just didn't respond when I asked why that figure had changed from what he'd provided on the phone.

The issuing company confirmed the loan was never an option, beyond the ~$990 (75% of the surrender value). On a call in March, the agent denied providing any other loan information despite having previously provided the specific amount on the phone.

 

[sumwear]

@wasumaad Hi,

Universal Life Insurance can be a great tool for retirement, but the agent should have given you competent information. If they showed you the illustration correctly, you would see that in the first few years you can’t access the cash surrender value. Essentially you can’t access it until the cost of the insurance is paid off. Once the cost of the insurance is paid off, you should see the cash value grow, but this cash value and the cash surrender value are two different things. I think if you are able to sort something out with the company, that would be best IF you wish to continue to use it as a retirement fund. If it’s indexed, the funds are accumulating tax-free but you will pay taxes once you cash them out, unless you take a loan on the policy. If you take a loan it’s completely tax free but must be paid back in premiums before the policy matures. I’d say if you don’t want to continue with it see if you can convert it to another form of life insurance and maybe look into a Roth IRA. Hope I didn’t confuse you, and good luck sorting it out.

 

[wasumaad]

@sumwear Thank you for that explanation -- it makes sense that the cost of the insurance would need to be paid off first. I did not know that the funds would be taxed unless a loan was taken on the policy. The agent initially referred to the accumulated value as the 'cash value' but in March began referring got the cash surrender value as the cash value instead (and said that he'd always just meant the surrender value when referring to the cash value, which didn't add up).

The policy is indexed, and I don't wish to continue using it as a retirement fund. Would I go through the issuing company to try to convert it to another form of life insurance or a Roth IRA?