Guides
Universal life cost-of-insurance increases and what to do
Why insurers raise universal life cost-of-insurance charges, what the contract allows, what documented lawsuits found, and what to do if you get a notice.
A cost-of-insurance (COI) increase is a rise in the monthly charge an insurer deducts from a universal life policy for the death benefit protection. Most policies let the insurer change the rate within a guaranteed maximum, but the rate must be set the way the contract says. If you receive an increase notice, ask for an in-force illustration, compare it with the contract's maximum rates, and decide whether to pay more, reduce coverage, or look at alternatives before the policy runs short.
How COI charges work
In a universal life policy, each month the insurer subtracts the cost of insurance from the account value. The charge is the COI rate (per $1,000 of risk) multiplied by the net amount at risk, which is the death benefit minus the account value. The rate rises as the insured ages. The contract lists a guaranteed maximum rate, usually based on a standard mortality table, and a lower current rate the insurer actually charges. The current rate is a non-guaranteed element: the insurer may raise it, up to the maximum, if the contract's conditions allow.
The wording of the conditions matters. Many contracts say the rates will be based on the insurer's expectations of future mortality, interest, expenses and persistency (how many policyholders keep their policies). Some contracts list the allowed factors more narrowly. Disputes tend to turn on whether the insurer used only the factors the contract permits.
Why insurers raise them
Insurers point to experience that differs from what they assumed when they priced the policy: people living longer than expected in some blocks, lower investment returns, higher expenses, and fewer policyholders lapsing than assumed (see lapse-supported pricing). Policies issued in the 1980s, 1990s and 2000s were priced when interest rates were higher. Policyholders and their lawyers have argued in court that some increases were really aimed at recovering past pricing mistakes, offsetting investment spreads, or targeting older policyholders with large policies.
What documented lawsuits show
These are matters of public record. Outcomes are summarized as reported; none of this predicts what happens with your policy. The details are covered further in cost-of-insurance lawsuits against life insurers: cases and outcomes.
- Transamerica. In October 2018, Consumer Watchdog reported that Transamerica agreed to pay $195 million to settle a class action over increases of up to 38% on roughly 70,000 universal life policies originally sold in the late 1980s and early 1990s. Transamerica's parent Aegon announced the settlement in a press release in 2018. Policyholders were to receive account credits or cash for lapsed policies and protection from further monthly deduction rate increases for five years.
- AXA Equitable (now Equitable). In early 2016, AXA raised COI rates on certain universal life policies issued between 2004 and 2007 with issue ages 70 and above and a face amount of $1 million or more, according to its SEC filings. The resulting class action, Brach Family Foundation v. AXA Equitable, ended in a $307.5 million settlement; in October 2023 Judge Jesse Furman awarded class counsel $101.08 million in fees, as reported by USA Herald.
- Phoenix. After increases in 2010 and 2011, life settlement investors sued Phoenix. A $134.8 million settlement, including a five-year freeze on COI rate increases, was approved by Judge Colleen McMahon in the Southern District of New York on September 9, 2015, according to a press report reprinted by plaintiffs' counsel. It included $40.5 million in cash.
- Lincoln National (Lincoln Financial). Lincoln and a Cigna unit (Connecticut General) reached a provisional $147.5 million class settlement in Glover v. Connecticut General Life Insurance Co. On August 11, 2026, the U.S. Court of Appeals for the Second Circuit reversed the order certifying the settlement class and vacated the judgment, finding the named plaintiffs were not typical of class members with other insurers' policies, and sent the case back to the district court. The outcome after remand is not final as of this writing.
Plaintiffs in these cases ranged from individual consumers to institutional and life settlement investors. Settlements of this kind commonly resolve a dispute without a court finding of wrongdoing.
What to do if you get an increase notice
- Read the notice and your contract. Find the guaranteed maximum COI rates in the policy's schedule and the paragraph describing how rates can change.
- Request an in-force illustration at the new rate. It shows how long the policy lasts if you keep paying what you pay now. See how to request and read an in-force illustration.
- Test the options. Ask the insurer to quote: (a) the premium needed to reach age 95 or 100; (b) the effect of reducing the death benefit; (c) any nonforfeiture options or reduced paid-up benefit.
- Check for a guarantee. A no-lapse guarantees on universal life: how they work may protect the policy if you pay a stated premium, but its terms control. Ask whether the increase affects it.
- Compare alternatives. A 1035 exchanges: swapping policies without tax to a new policy usually means new underwriting at an older age and a new set of costs. Surrender may be taxable. The keep, surrender or sell your policy? frames the trade-off.
- Ask your state insurance department whether it received similar complaints and whether the increase had to be filed. Rules on notice and filing differ by state.
- Keep the paper trail. Save notices and illustrations. If the notice came with a class action settlement notice, read the deadlines; opting out or doing nothing can affect your rights.
- Consider an independent review. A fee-only planner or insurance consultant who is not paid by commission can read the contract. For legal questions about whether an increase breached the contract, an attorney is the place for specifics.
A hypothetical example
Say a policy has a $250,000 death benefit and an account value of $50,000, leaving $200,000 at risk. If the monthly COI rate is $0.50 per $1,000, the charge is $100 a month. If the insurer raises that rate by 40% to $0.70, the charge becomes $140. The extra $480 a year seems manageable, but the account was already being drained to pay the charge, so it runs out several years sooner. These rates are invented for illustration only.
Key takeaways
- A COI increase raises the monthly insurance charge inside a universal life policy; the contract's maximum rate is the ceiling.
- Whether an increase was allowed depends on the factors the contract permits; courts have seen several large class actions, with settlements reported for Transamerica ($195 million), AXA Equitable ($307.5 million) and Phoenix ($134.8 million).
- The Second Circuit's August 11, 2026 ruling vacated the certified Lincoln/Connecticut General settlement class, so that matter is not final.
- Respond to a notice quickly: get an in-force illustration, price the options, and check any guarantee before you decide.