A guaranteed universal life insurance policy (GUL) is designed to meet your long-term insurance needs by offering a blend of affordability and reliability without the investment complexities found in other life insurance products. With fixed premiums and the promise of lifelong coverage, a GUL policy ensures financial stability and peace of mind for you and your loved ones. It stands out for its simplicity, making it an ideal choice if you seek a straightforward, permanent life insurance solution that focuses solely on providing a death benefit safety net rather than an investment opportunity.
The Best Guaranteed Universal Life Insurance Policy
Table of Contents
- Key Takeaways
- Introduction to Guaranteed Universal Life Insurance
- How Does a GUL Policy Work?
- Pros and Cons of GUL
- Comparison with Other Life Insurance Policies
- Cost Considerations
- Sample Rates
- Choosing the Right GUL Policy
- Top GUL Insurance Companies
- Who Should Consider GUL?
- GUL Riders
- Policy Application and Underwriting Process
- Conclusion
Key Takeaways
- Guaranteed universal life insurance provides stable, long-term death benefit protection with fixed premiums and minimal cash value, making it a cost-effective option for those seeking permanent coverage without the complexity or higher costs associated with other permanent life policies.
- GUL offers flexibility in coverage duration, with the unique feature of maintaining coverage with a No-Lapse Guarantee, and some policies may include a return of premium option.
- The main advantages of GUL include affordability, guaranteed premiums, and simplicity in long-term coverage, whereas its drawbacks are limited flexibility and minimal or no cash value accumulation.
- GUL stands out from a term life policy by offering lifelong coverage with fixed premiums, from whole life and universal life by not focusing on cash value accumulation, and from variable universal life by avoiding investment risks.
- Premiums for GUL are influenced by factors such as the insured’s age, health, lifestyle, and the chosen insurance company, and it’s crucial to select a policy that aligns with individual needs, including no-lapse guarantees and possible return of premium options.
- GUL is particularly suited for individuals seeking reliable death benefit coverage without the high premiums or investment components of other policies, and the application process may involve a medical exam, with simplified underwriting options also available.
Introduction to Guaranteed Universal Life Insurance
Guaranteed universal life, or GUL, offers long-term death benefit protection. The fixed premiums on these policies allow for stability โ and provided that the premiums are paid, the coverage will remain in force for as long as you need it.
Unlike other forms of universal life insurance, some guaranteed universal life insurance policies may not offer a cash value component. In other GUL policies, the cash value accumulation is minimal. Therefore, the premium is often lower than that on a whole life or regular universal life policy with a comparable amount of death benefit.
How Does Guaranteed Universal Life Insurance Work?
A guaranteed universal life insurance policy is a type of permanent life insurance coverage. Depending on the policy and the offering insurance carrier, a GUL policyholder can typically opt for the coverage to last anywhere from 20 years to their entire lifetime.
Guaranteed universal life policies also offer a fixed premium throughout the term, which can be to age 90, 95, 100, or 121. This can make it easier to budget for the cost of insurance โ even as you age, as well as if you contract adverse health issues in the future. The death benefit on a GUL policy is also guaranteed.
Like other types of universal life insurance, you have the ability to tailor the premium payment and schedule (within certain guidelines) on a guaranteed universal life policy. Therefore, a guaranteed universal policy provides more flexibility than some other permanent coverage options like whole life insurance.
Cannot Be Cancelled (No Lapse Guarantee)
One of the most unique features about guaranteed universal life insurance is that the policy will not be cancelled (i.e., it will not lapse), even if the cash value does not cover the policyโs premium charges in the future.
No-Lapse guarantees set a specific premium and duration. As long as this premium is paid within the set time frame, the policy is guaranteed to remain active without lapsing.
In this case, the death benefit in the policy will remain in effect unless the guaranteed value is less than or equal to zero, or if the cash value does not cover the monthly deduction charge and the policy also has an unpaid loan balance.
Further, in some instances, if a guaranteed universal life policy is underfunded for any reason, the insurance company will keep the coverage in place, but it will just simply reduce the length of the benefit period on the policy.
*Note: It is important to pay your guaranteed universal life insurance premiums on time to avoid losing the “guaranteed” features. Setting up auto pay is one way to ensure that your premiums are timely paid.
Return of Premium
There may also be other options, or riders, available with guaranteed universal life insurance policies, too, such as a return of premium option. This allows you to receive a refund of some or all of the premiums you paid if you cancel the policy, usually within a specific window of time.
Because there is little (or no) cash value accumulation in a guaranteed universal life insurance policy, the premium also remains affordable. So, for those who are seeking high cash value growth, guaranteed universal life may not be the best policy option. However, for reliable and affordable permanent death benefit coverage with guaranteed coverage, GUL could be the right choice.
Pros and Cons of Guaranteed Universal Life
As with other types of life insurance, guaranteed universal life has both pros and cons. These can depend on what your objectives are, though. In general, the primary advantages of guaranteed universal life insurance include:
- Affordability โ low cost, permanent death benefit coverage
- Guaranteed premiums โ no price increases, even as the insured gets older and may incur various adverse health issues
- Long term life insurance protection, but without the complexity of cash value growth, making it an excellent option for estate planning and leaving an inheritance.
Even with all of the guaranteed universal life benefits, there are some potential guaranteed universal life insurance drawbacks to be mindful of, too, including:
- Limited flexibility โ particularly compared to other types of universal life insurance policies
- Low, or even no, cash value accumulation
Guaranteed Universal Life Pros and Cons
| Advantages of Guaranteed Universal Life Insurance | Disadvantages of Guaranteed Universal Life Insurance |
|---|---|
| Affordability | Limited flexibility |
| Guaranteed premiums | Low or no cash value accumulation |
| Long term coverage (without the complexity of cash value growth) |
Comparing GUL with Other Types of Life Insurance Policies
Although there are some similarities between guaranteed universal life insurance and other types of life insurance policies, there are also some significant differences. So, it is important that you understand how all of these policiesโ features can impact their performance and the benefits they offer.
GUL vs. Term Life Insurance
A term life insurance policy is considered the most basic, plain vanilla type of life insurance coverage. These policies offer death benefit protection only, with no cash value or investment build up. Because of that, the premiums on term life insurance are typically low โ especially if the insured is relatively young and in good health at the time of policy application.
As its name implies, term insurance only remains in force for a set amount of time, or โterm,โ such as 10 years or 20 years. At that point, the policy expires โ unless it has been converted to a permanent form of life insurance coverage.
If the policyholder wishes to renew a term policy, the premium on the new coverage going forward will typically be higher, given the insuredโs then-current higher age โ and possibly any adverse health issues. And in some cases, the individual may no longer be insurable.
Unlike term life insurance that can be outlived, with a guaranteed universal life insurance policy, the policy will remain in force as long as the premium is paid. Further, the amount of the premium is locked in for life, so there is no increase in cost in the future.
With that in mind, a term life insurance policy may be better suited for โtemporaryโ needs, like covering a 15-year mortgage balance, whereas a guaranteed universal life insurance policy can be relied upon for longer term coverage needs like providing for a surviving spouse, payment of final expenses, estate planning, or leaving behind an inheritance.
GUL vs. Whole Life Insurance
Whole life insurance is a type of permanent life insurance that provides lifetime guaranteed death benefit protection and cash value build up. The funds in the cash component grow tax deferred, meaning that there is no tax due on the gain unless or until it is withdrawn.
Funds from the cash value may either be withdrawn or borrowed via policy loans. In the latter case, the money is received tax free. It can then be used for a wide range of needs, such as supplementing retirement income, making purchases, or even paying off higher interest debts like credit card balances.
Both the death benefit and the premium are typically locked in and guaranteed with a whole life insurance policy. However, because cash value build up is an integral part of whole life insurance, the premium is usually higher with these policies compared to term life and guaranteed universal life insurance.
Compare Different Types of Life Insurance Policies
GUL vs. Indexed Universal Life Insurance
Indexed Universal Life Insurance, commonly known as IUL, builds upon the foundation of traditional Universal Life insurance by providing both a death benefit and a cash value component that appreciates over time. Like universal life policies, the cash value in an IUL can be accessed through partial withdrawals or loans, and can even be used to augment the death benefit.
The distinct advantage of an indexed universal life insurance policy lies in its potential for higher growth, as it allows policyholders to allocate a portion of the cash value to equity-indexed subaccounts. These subaccounts are tied to the performance of major indices like the S&P 500 or NASDAQ 100, offering the opportunity for accelerated growth during bullish market phases. However, this potential is moderated by specific policy mechanisms such as caps and participation rates, which define the extent to which the cash value can benefit from the index’s performance.
An indexed universal life policy offers the flexibility to raise or lower the premium within certain limits. This can offer a financial cushion if your financial circumstances change. However, only making the minimum premium can also negatively impact the policyโs cash value.
The cost of coverage in a regular universal life insurance policy is not guaranteed. But is it with a guaranteed universal life insurance policy. So, the cost of the death benefit in a regular universal life insurance policy could go up, and in turn, increase the premium, as the insured gets older. And in some instances, it may even become cost prohibitive, causing the policy to lapse.
GUL vs. Variable Universal Life Insurance
Another type of permanent life insurance that offers a death benefit and flexible premiums is variable universal life, or VUL. Funds in the variable universal life insurance policyโs cash value can be invested in equities โ such as mutual funds โ via the insurerโs โsub-accounts.โ (Note that funds are not invested directly in the stock market).
Therefore, VUL offers the opportunity for high growth potential. And, as with other types of permanent life insurance, the funds in the cash component of the policy also growย on a tax deferred basis.
But, there is also the risk of loss if the underlying investments in a variable universal life insurance policy perform poorly. So, variable universal life may not be a good alternative for those who are risk adverse and seeking guarantees.
GUL Cost Considerations
Guaranteed universal life is going to have a lower cost than other universal life insurance policies. However, there are several factors that can impact the cost of a guaranteed universal life insurance policy. These factors are:
- Age and gender of the insured
- The insuredโs health condition (at the time of application)
- Amount of coverage (i.e., the death benefit)
- Insuredโs lifestyle / hobbies (for example, risky hobbies like rock climbing could result in a higher premium being charged)
- Insuredโs occupation
- Insuredโs smoking status
- Family health history
- Medications taken by the insured
- Premium payment mode (i.e., monthly or annually, as well as limited pay โ like 7 years โ versus making regular lifetime payments)
- Insurance company that the policy is being purchased from
Example GUL Premium Rates
The following sample rates are based upon a guaranteed universal life insurance policy to age 121 for a male at a preferred plus rate class from A rated companies and higher. Rates are for informational purposes only and must be qualified for.
| Age | $100,000 | $250,000 | $500,000 | $1,000,000 |
|---|---|---|---|---|
| 40 | $879.23 | $1806.41 | $3612.69 | $6545.24 |
| 45 | $1072.89 | $2215.27 | $4430.26 | $7969.30 |
| 50 | $1334.15 | $2764.30 | $5528.46 | $10,183.30 |
| 55 | $1580.46 | $3635.82 | $7271.56 | $13,519.72 |
| 60 | $2017.20 | $4634.69 | $9269.24 | $17,365.04 |
| 65 | $2652.86 | $6420.10 | $12,840.14 | $23,802.49 |
Choosing the Right GUL Policy
While they share common features, not all guaranteed universal life insurance policies are exactly the same. So, it is important that you choose the right one for your particular needs and objectives.
The key features to look for when selecting a GUL policy should include the following:
- No-lapse guarantees
- Flexibility to reduce the death benefit
- Potential return of premium options
Where a guaranteed universal life insurance policy really shines is the ability to customize coverage to specific ages and the inclusion of various riders for added protection. You can tailor your GUL policy to specific ages, such as age 90, 95, 100, 105, 110, & 121.
Specific riders that add additional value to the policy are the return of premium rider and the accidental death benefit rider. A return of premium rider allows the policyholder to get back all the premiums paid at the end of the policy. And the accidental death benefit rider pays out an additional death benefit amount if the insured dies by an accidental death.
Top Guaranteed Universal Life Insurance Companies
We have an entire guide on the best universal life insurance companies, so please check it out if you want more detailed information on any of the following companies.
This list is fluid as the top guaranteed universal life insurance company is the one that offers the right product that meets your goals and objectives.
- Pacific Life
- North American Company
- Lincoln National
- Prudential
- Mutual of Omaha
- John Hancock
- Foresters Financial
- Penn Mutual Life
- Transamerica
- American National
Guaranteed Universal Life Insurance Riders
Discover how to tailor your universal life insurance policy to meet your unique needs.
- Long-term Care Rider: Utilize your death benefit for long-term care expenses. Chronic Illness Rider: You have the option to access a portion of your death benefit early if you are diagnosed with a permanent chronic illness.
- Critical Illness Rider: This rider enables you to draw from your death benefit in advance if you are diagnosed with a critical illness, such as a heart attack or cancer. Terminal Illness Rider: Should you be diagnosed with a terminal illness, this rider allows you to receive a part of your death benefit prematurely.
- Accidental Death Benefit Rider: In the event of your accidental death, this rider provides your beneficiaries with an additional sum on top of your standard death benefit.
- Childrenโs Term Insurance Rider: This rider offers a life insurance payout if any of your children were to pass away.
- Waiver of Monthly Deductions Rider: After a 6-month waiting period, this rider covers all monthly deductions if you become disabled.
Who Should Consider Guaranteed Universal Life Insurance?
Given the many benefits that a GUL policy can offer, is it the right option for you?
It could be if you:
- Are seeking lifelong death benefit coverage without the corresponding high premiums
- Are not concerned with building up significant cash value
- Do not want any complex investment features within the policy
- Would like options or riders available for customizing your policy
- Want the assurance that your premium amount will not go up in the future โ even if you become uninsurable
Guaranteed Universal Life Insurance Policy Application and Underwriting Process
If you decide to move forward with purchasing a guaranteed universal life insurance policy, you will typically be required to go through an application and life insurance underwriting process. The application for coverage generally asks for both personal and health information. This is reviewed by the insurance companyโs underwriters.
You may also be required to undergo a life insurance medical examination. This can provide more information to the insurance company regarding any health risks that you could pose if the insurer accepts you for coverage. For example, those who have heart disease or diabetes are considered more risky life insurance candidates than those who are healthier.
For applicants who are considered high risk due to adverse health conditions, it may be possible to skip the medical exam as GUL insurance is often available both as fully underwritten (i.e., requiring a medical exam for acceptance) or with simplified underwriting (i.e., with no medical examination required). Note that no medical exam life insurance policies will usually require a higher amount of premium in order to help the insurance carrier offset the potential risk.
Working with a life insurance specialist can help you to narrow down which guaranteed universal life insurance policy – if any โ is best for you. They can also walk you thorough the underwriting and application process.
Conclusion
A guaranteed universal life insurance policy can be a strategic component in your comprehensive financial plan, offering you stable, long-term death benefit protection without the complexities and costs associated with investment components. With its fixed premiums it’s suitable if you prioritize reliable coverage and budget certainty over cash value accumulation, aligning well with your long-term insurance needs and financial stability.
Next Steps
๐ฅConnect With I&E! Schedule a Conversation with one of our Pro Client Guides to Discuss Strategies for Your Family, Your Investments, or Your Business, using Your Own numbers.
