Policy Owners Last reviewed: 2026-10-03 Part of Indexed universal life

Got a Cost of Insurance Increase Letter? What It Means and What to Do

Written and reviewed by Hans Goldstein, licensed insurance producer, NPN 20602398 · CA Insurance License #4273294
Last reviewed October 3, 2026 · Published October 3, 2026

Short answer: a cost of insurance (COI) increase letter means the insurer is raising the monthly charge for the insurance part of your universal life policy, up to the maximum rates guaranteed in the contract. It is usually allowed if it stays within those maximums and follows the policy's stated reasons. It can drain cash value and move your policy's lapse date years earlier. Do not panic or surrender: get an in-force illustration at the new rates, then choose between paying more, lowering the face, or exchanging.

What the letter is actually saying

Universal life policies (including IUL) charge a monthly cost of insurance on the net amount at risk: the death benefit minus the cash value. The contract sets current COI rates the insurer can change and guaranteed maximum rates it cannot exceed. A COI increase letter means current rates are moving up toward the maximums. Because COI rises with age anyway, an increase on an older policy can multiply the monthly drain. Why COI climbs with age.

Is it allowed?

Usually, within limits. Insurers may change current charges within the guaranteed maximums, generally based on the factors the policy names (often expected mortality, persistency, investment earnings and expenses). Several insurers have faced class actions alleging COI increases on older universal life blocks were not based on permitted factors, and some paid large settlements. Those cases mostly involved policies sold in earlier decades; we found no 2020 to 2026 COI increase aimed specifically at IUL. If you think your increase is part of a class action, a settlement notice would come separately.

Policy owners

Got a COI increase letter?

Send your email and I'll send the in-force illustration request letter. Return the illustration and I'll review it within one business day.

We’ll email it to you. Hans Goldstein · NPN 20602398.

Rather talk it through? Or book 15 minutes on Hans’s calendar.

What to do in the next 30 days

Your 30-day plan

Read the letter for the effective date and which policies it covers.
As the owner, request an in-force illustration at the new rates, showing the year the policy lapses at your current premium and the premium needed to carry it to age 100 or 121.
Find your current cash value and any loan on the latest annual statement.
Do not stop paying and do not surrender in a hurry; surrender ends coverage you may not be able to replace at your age.
Send the letter and illustration to Hans for a free review within one business day.

Your options, after the illustration

Options after a COI increase

Option	When it fits	Watch out for
Pay the higher premium	You need the full death benefit and can afford it	It may rise again later
Reduce the face amount	You can live with less coverage	Lower death benefit; check surrender charges and MEC effects
Use cash value to cover charges for a while	A bridge for a few years	Shortens the time to lapse
1035 exchange to a new policy or GUL	You are insurable and a new contract is cheaper for the same need	New underwriting, new surrender charges, replacement rules
Let it go or surrender	You no longer need the coverage	Taxable gain and possible loan tax; last resort

Replacement of a life policy in California requires specific notices and comparisons (CA Ins. Code 10509), and it only makes sense if the new policy is clearly better after its own costs. 1035 exchange of an older UL.

Send the statement or letter. Get a plain answer.

Within one business day you get a written read: what the letter or statement means for your policy, the options, and the one to take first. No pressure to change anything.

Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.

Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer

Frequently asked questions

What is a cost of insurance increase?

An increase in the monthly charge a universal life policy deducts for the insurance part of the coverage, up to the guaranteed maximum rates in the contract.

Can my insurance company raise my cost of insurance?

Usually yes, within the guaranteed maximums and the factors named in the policy. Some older UL increases have been challenged in court.

What should I do after a COI increase letter?

Request an in-force illustration at the new rates, check cash value and loans, and review options before stopping payments or surrendering.

Will a COI increase make my policy lapse?

It can move the lapse date earlier by draining cash value faster. The in-force illustration shows when.

Should I replace my policy after a COI increase?

Only if you are insurable and a new policy is clearly better after new underwriting, surrender charges and replacement rules.

Sources

Hans Goldstein, CA Insurance License #4273294 · NPN 20602398 · Goldstein & Co. LLC dba Goldstein Insurance Services, CA License #6016830

Contact: hans@hansgoldstein.com · 213-414-2808

General education, not tax or legal advice. Tax treatment depends on your facts and on current law, which can change. Talk to your CPA or estate attorney. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Guarantees apply only to the contractual terms of the policy. Caps, participation rates, loan rates, charges and dividends are not guaranteed and can change. Hans is paid a commission by the insurer if you buy a policy through him. For life insurance, ask and he will tell you what he earns on your specific policy. Product and company names are trademarks of their owners. Goldstein Insurance Services is an independent agency, not affiliated with or endorsed by any insurer named here. Life insurance requires underwriting; not everyone qualifies. This page describes products in general terms; read the policy and the insurer's disclosures before you buy.