Low interest rates spell trouble for some policies. (Focus: Insurance)

Consumers who have had a universal life insurance policy or a traditional whole life insurance policy for more than a year may be in for some surprises.

Falling interest rates are affecting some life insurance policies as steadily as they affect other investments.

In the early '80s, when interest rates were very high, some consumers dropped out of their traditional whole life policies to switch to universal life. These policies are more directly linked to prevailing interest rates and can lose value as rates fall, according to Clifford Caplan, a certified financial planner in Norwood.

When someone pays whole life premiums to an insurance company, it invests that money to generate dividends. Over a number of years, the customer accumulates dividends in his or her policy. Down the road, the dividends may be used to pay the premium, or to buy additional insurance.

When the rate insurance companies earn on investments falls, so do dividends. If earnings are lower than the agent originally projected, the policyholder may have to pay a few years longer than expected, or pay in more money to keep the policy from consuming all its cash value and …