Many consumers have a need for long-term life insurance coverage, but are not necessarily interested in accumulating cash value. It is also important to many policy owners to have the flexibility to make adjustments to their policy as life circumstances change. In cases where lifetime guarantees and flexibility are important, guaranteed universal life insurance may be the right fit.
With the numerous variations of permanent life insurance available in today’s marketplace it is completely understandable that consumers can become overwhelmed with policy options.
The intent of this article, Guaranteed Universal Life Insurance: Lifetime Coverage with the Lowest Possible Premiums, is to provide an overview of guaranteed universal life insurance and how it compares to other types of life insurance.
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Guaranteed Universal Life Insurance
Guaranteed universal life insurance, or no lapse universal life, is a type of permanent life insurance that combines many of the benefits of both term and permanent coverage.
Essentially, a guaranteed universal life insurance policy provides lifetime coverage at the lowest possible guaranteed premium.
While term life policies typically provide level premiums for 10, 20, or 30 years, a guaranteed universal life policy can be designed to have level premiums for an insured’s entire lifetime. These plans will often allow a policy owner to choose a policy length, such as until age 90, 95, 100 or beyond (maximum age is usually 121). Since this type of policy is designed primarily to provide lifetime coverage at the lowest guaranteed premium, cash value is often a secondary consideration. If policies do accumulate cash value, it is typically at a lower rate than other permanent policies with higher premiums. As universal life plans, these policies offer flexibility with regard to death benefit and premiums, however it is extremely important that policy owners meet minimum premium requirements to maintain guarantees.
Guaranteed Universal Life Policy Riders
As with other universal life policies, these plans often offer additional features, or policy riders, depending on issuing insurance company.
Riders allow a policy owner to maximize policy benefits at minimal additional cost. Typical policy riders available depend on the particular insurance company.
Pros and Cons of Guaranteed Universal Life
As with different types of life insurance products, these policies have positive and negative aspects which may vary depending on the coverage needs of the proposed insured. The following provides an overview of commonly considered pros and cons related to this type of policy.
Sample Guaranteed Universal Life Rates
Premiums for these plans are routinely higher than term policies which have a shorter duration and lower than other permanent policies which may accumulate more cash value. Premiums for this type of policy may also vary greatly by insurance company depending on policy structure and features. The following illustration provides sample rates for guaranteed universal life policies on a 35-year-old male non-smoker qualifying for a Preferred Plus underwriting class.
Guaranteed Universal Life to age 90
Note: The rates illustrated above are for a $250,000 GUL insurance policy to age 90 on a 35-year-old male non-smoker qualifying for the Preferred Plus underwriting class.
Guaranteed Universal Life to age 100
Note: The rates illustrated above are for a $250,000 GUL insurance policy to age 100 on a 35-year-old male non-smoker qualifying for the Preferred Plus underwriting class.
Guaranteed Universal Life to age 121
Note: The rates illustrated above are for a $250,000 GUL insurance policy to age 121 on a 35-year-old male non-smoker qualifying for the Preferred Plus underwriting class.
Best Candidates for Guaranteed Universal Life
Guaranteed universal life insurance is often used by individuals who have a long-term need for coverage (beyond what term policies offer) to meet financial obligations. Given its permanent nature, this type of policy can be ideal for long-term income replacement, future charitable contributions, estate planning, business continuation, and other long-term needs.
Case Studies - Guaranteed Universal Life
Case Study #1
Molly is a 35-year-old single mother of a son with special needs, who requires ongoing home health care. Since Molly’s job as a human resources manager is the family’s only source of income she is concerned about her son Brad’s financial support when she passes away. In her situation, Molly needs lifetime life insurance coverage but is not necessarily concerned with cash value accumulation. In speaking with her insurance agent Molly learns that a guaranteed universal life policy would provide the permanent coverage that she needs at the lowest possible premiums. After reviewing her coverage needs, Molly chooses a $500,000 guaranteed universal life insurance policy. Guaranteed universal life will meet Molly’s long-term coverage needs at the lowest possible premiums.
Case Study #2
Dale is a 65-year-old farmer with three grown children. His son Jim works on the family farm with him, and would like to take over the business someday. Dale’s other two children, Sam and Tami, have chosen careers not related to the family business. In considering his estate, Dale wants to give the farm to Jim when he retires but would also like for Sam and Tami to receive their share of his estate when he passes. In speaking with his life insurance agent, Dale learns that guaranteed universal life policies could be used to leave an inheritance to Sam and Tami upon his death keeping the farm intact for Jim. After analyzing his coverage needs, Dale decides on a $2,000,000 guaranteed universal life insurance policies with Sam and Tami as beneficiaries. Guaranteed universal life insurance will meet Dale’s coverage needs allowing all three of his children to share equally in the fruits of his life’s work.
Best Guaranteed Universal Life Companies
Most companies in today’s marketplace offer these types of policies. The following companies are recommended in our experience based on company ratings, products offered, premium rates, customer service, and other factors.
Warning: As a final note, it is extremely important that individuals considering a guaranteed universal life insurance policy understand and maintain the guaranteed premium requirements of the policy. Failure to pay required premiums as prescribed may eliminate certain policy guarantees.
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James Shiver, DBA is the founder of ChoiceLifeQuote.com and a multi-state licensed independent life insurance agent serving the individual family and small-business markets. Dr. Shiver also serves as a university business professor, as well as being an Accredited Financial Counselor®.