A policy review is one of the best ways to open a conversation with a new or existing client. Many older universal life policies are underperforming and may need higher premiums to stay in force. Term/UL hybrid products can give those clients a more affordable path forward.
Key takeaways
- Many older universal life policies are underperforming, and some are in danger of lapsing without higher premium payments.
- Term/UL hybrids combine the flexible premiums of universal life with the affordability of term, and many accept a single premium from a 1035 exchange.
- Moving cash value before it’s exhausted can help a client lower ongoing premiums, buy a paid-up policy or secure more death benefit.
Before cash values are exhausted paying for an already unaffordable policy, show clients how a 1035 exchange could put that money to better use.
Why policy reviews open doors
When you review a client’s existing coverage, you’ll often find a policy performing well below its original illustration. Many universal life policies were sold assuming higher interest crediting rates, and some now require larger premiums to avoid lapse. Clients on fixed incomes may struggle to keep paying even the original premium. For timing and warning signs, see older UL policies at risk of lapse.
How term/UL hybrid products work
Term/UL hybrids are universal life policies designed to compete on price with term. They typically combine:
- Flexible premiums, including a single payment funded by a 1035 exchange, which a traditional term plan can’t accept.
- Guarantee periods that commonly run 10, 15, 20 or 30 years.
- A longer secondary guarantee that, on some products, can extend coverage as far as age 121 if the client pays a higher premium, without new medical or financial underwriting.
Product designs vary by carrier, so confirm current features and availability before you present one.
Using a 1035 exchange
A 1035 exchange lets a client move cash value from an existing life policy into a new one without triggering income tax on the gain, provided the exchange is done correctly. With a hybrid, that cash value can be used to:
- Lower the client’s ongoing premium
- Purchase a paid-up policy
- Secure a greater death benefit for the same outlay
Learn more about when a 1035 exchange makes sense.
Before you recommend a change
- Request an in-force illustration of the current policy at current and guaranteed assumptions.
- Compare surrender charges, any outstanding loans and the client’s current insurability.
- Keep the old policy in force until the new one is approved and issued.
- Document why the change is in the client’s best interest and follow state replacement rules.
Our life sales desk can help you compare options side by side.
Frequently asked questions
What is a term/UL hybrid life insurance policy?
It’s a universal life policy priced to compete with term. It offers guarantee periods like term, such as 10 to 30 years, plus flexible premiums and, on some products, the option to extend coverage later without new underwriting.
Can I 1035 exchange an old UL policy into a term/UL hybrid?
Often, yes. Many hybrids accept a single premium from a 1035 exchange, which traditional term can’t. The exchange must be done properly to avoid tax on any gain, and the new policy should be issued before the old one is surrendered.
How do I know if a client’s UL policy is at risk of lapsing?
Order an in-force illustration at current and guaranteed assumptions. If it shows the policy lapsing before the client’s life expectancy at the current premium, it’s time to discuss options.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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