In yet another round of decreases in non-guaranteed attributes of life insurance policies, Equitable Life has just decreased their dividend scale. From the announcement:
Equitable Life’s Board of Directors has approved a reduction in its dividend scale, effective July 1, 2012. The dividend scale reduction is a prudent decision as the prolonged low interest-rate environment continues to put downward pressure on the yields of Equitable Life’s Participating Account.
Unfortunately for policyholders, this doesn’t just mean less money this year. This decrease can negatively impact a variety of policy features in the years to come. Things that policyowners count on such as cash value and paid up dates can be directly affected by this change. Think your 20 year old policy will be paid up in another 10 years when you retire? You may hit retirement and find out that you have another 5, 10, 20 years of paying premiums on the policy. Decreased dividends can have this type of impact.
Equitable indicated that they are being prudent in this decrease, and I agree. In times of difficult investments, insurance companies have to move to protect their longevity and stability. And the easiest way to chop is through non-guaranteed policy options. I mean, that’s got to beat cost reductions at head office right?
Moral of the story, only every buy life insurance policies with fully guaranteed benefits. If you don’t, expect that at some point in the future the insurance company will use your policy as a cost saving tactic.