The Low Down on No Lapse Universal Life Insurance and More
So what exactly is Guaranteed Universal Life Insurance then? Is it just another universal life insurance product…just what we need! Grrreat!!
I’m actually being sarcastic here because traditional, interest sensitive, Universal Life (UL) products from many life insurance companies have struggled for many years now. Due to low interest rates, many consumers who own these policies have had some hard decisions to make. The meager returns due to low interest rates have caused many policies to really under perform and threaten even the loss of death benefits for some select policy holders out there.
I won’t go into specifics here in this article, because it is beyond the scope of a nuts and bolts article about Guaranteed Universal Life Insurance.
To start you off in the right direction, I will tell you what it is not first.
It is not guaranteed acceptance life insurance (guaranteed issue life insurance) which is much most expensive life insurance per the dollar spent. This certainly does not benefit those in decent health.
Second, though it may also sound like traditional, Universal Life Insurance, it is not the same product.
Regardless, be sure you do not confuse the two as you do your due diligence.
Guaranteed Universal Life is a permanent life insurance product offered by a large number of life insurance companies. It has features of both term life insurance (lower cost) and whole life insurance (permanent coverage).
Coverage Lengths run to age 90, 95 all they way to age 121. You select what age you want coverage to run to.
Why are life insurance consumers turning to it versus other life insurance products?
First, it offers guaranteed values, and fixed, level premiums for starters.
Two, it does not have the risk of term life insurance where you can outlive your coverage period where by you could leave your family without financial protection and/or the legacy you desired.
Many people just see whole life insurance as overly expensive and in some cases I do agree.
With the strong possibility of outliving term life insurance in our modern medicine era, Guaranteed Universal Life Insurance steps up to fill a major void.
You could call it the great equalizer in the war against higher priced, whole life insurance.
Many folks who may be in their 50’s and 60’s have term life insurance that has or will expire soon.
If you have gotten your hair raising statement from your life insurance company about the major league rate increase coming at expiration, you are learning what happens to your rates when the “term” is over.
Term life insurance cannot be purchased to reach the upper ages that many seniors are now living. Male and female alike. As a result, a permanent form of coverage should be purchased to guarantee you do not outlive your coverage.
As we age, it becomes harder to qualify for life insurance do to our natural decline of health.
Your health can change slowly or drastically at any time and you could become very difficult to insure. The cost of life insurance could go thru the roof.
Life Insurance to Even Age 121…Guaranteed Universal Life Insurance Flexibility
While Guaranteed Universal Life (sometimes mistakenly called universal guaranteed life insurance) is considered permanent insurance like Whole life, but is a bit different.
First, these policies commonly have no cash value accumulation feature to them.
Number two…you are purchasing coverage to a ripe old birth date well beyond the life of 95% of the human population. Whether that is age 90, 95 or even 121 years of age, you are covered in full. Just pay the premium and no worries.
Since the coverage does not develop cash value, there are not all the management fees built into a typical cash value policy which translates into a lower premium for you.
A key point to remember…a GUL policy has a fixed premium that stays the same throughout the life of the policy.
A “level” term life insurance policy would have fixed rates for the specific term you elected, while a GUL policy is tied to a specific age such a 90, 95, 100, 110, and even 121.
GUL coverage offers coverage to much higher age limits than term.
The higher the age elected for coverage, the higher the cost. The risk to the insurer goes up as the elected age of coverage rises (90, 95,100, etc.) as the likelihood of an inevitable death benefit payout becomes even more likely. As a result of this, the insurance company does charge higher premiums to offset the additional risk.
However, with the ability to match coverage to a anticipated life and budget, you are allowed to easily tailor coverage to how long you want its permanent protection.
Sometimes, Guaranteed Universal Life Insurance is more affordable than term life insurance once you are beyond age 60 or so.
For statistical information on life expectancy in the US, you can use the Social Security Benefits Planner to see why Guaranteed UL is probably a wise option
How Does GUL Differ from Traditional Universal Life Insurance (UL)?
I mentioned earlier in this article, that owning a traditional Universal Life Insurance policy has been pretty rocky for plenty of people.
Cash values in many policies issued in the 80’s and 90’s has required over funding to maintain full benefits well beyond what should have been the case.
Low interest rates have hit these policies hard. As a rule, those policies have under performed.
This is the way things work with traditional universal life. That is a downside of a flexible premium, interest sensitive product.
Withdrawing money from a UL policy can result in some hefty fees in a conceptually hard to understand policy for the average life insurance consumer.
You can borrow cash from the policy as a loan but if you fail to repay the loan you could lose your coverage due to an underfunded policy.
Traditional Universal Life (UL) does not have level premiums (flexible).
If interest rates drop, you may be forced to increase the size of your premium to keep the policy in force.
That is the “rocky” situation that life insurance consumers who purchased UL policies from the 80’s have gotten themselves into.
The culprit, plummeting interest rates and the cost of annually renewing term life insurance inside a semi complicated product.
Traditional Universal Life is not a policy you can throw in the fire safe and call it good.
Guaranteed Universal Life coverage is not affected by interest rates because it has a no lapse guarantee built in.
Premiums are level for the duration of coverage. The policy is not affected by outside economic forces, similar to a term life insurance policy (temporary coverage).
The Pro’s of Guaranteed Universal Life Insurance Over Traditional Universal Life
- Guaranteed Level Premium. Your cost of insurance will never change regardless of age, health or interest rates!!
- You are not spending money for a benefit you probably don’t need or would be better off socking else where. Put the money into mortgage pay down or other conservative investment.
- Your death benefit isn’t link tied to interest rates. You are paying for pure life insurance protection, similar to term life insurance.
- Guaranteed Universal Life is more affordable the traditional Universal Life Insurance so the up front costs are reduced.
- Peace of mind knowing that coverage cannot be underfunded causing loss of coverage due to changes in the market.
Example Scenario of GUL Versus Traditional Universal Life
A 65 year old male (Tom) in very good health requests a quote of $250,000 in 2016 to leave for his son and daughter. Tom new he needed permanent coverage to ensure his kids would benefit he wanted to leave behind as a legacy.
He was quoted roughly $5700 annually to cover the premium. The kicker is, he needed to earn 5% on the monies in the cash account to maintain lifetime coverage. That is pretty tough to do these days. He would have to over fund by paying much higher premiums to offset this.
Now, he was also quoted a for a Guaranteed Universal Life policy. Tom figured no one in his family would live beyond 90 but requested a GUL quote to age 95. He was quoted about $4700 annually which guarantees a full death benefit of $250,000 to his son and daughter as beneficiaries. That premium will never change and the benefits will never go down. He knows exactly what his policy will be worth to his kids if he pays his premiums. No worries about how the cash account is performing, interest rates etc. In addition, his annual premium offered a huge savings.
Even if everything goes to pot like 2006 again sending interest rates to rock bottom, Tom is going to be comfortably insured by a Guaranteed Universal Life Insurance policy.
Common Uses For Guaranteed Universal Life Policies
- Estate Planning
- Creating a Legacy or Inheritance
- Charitable Giving
- Pension Maximization
- Covering All End of Life (Final Expenses) Needs
Guaranteed Universal Life Insurance For Seniors
Not to be confused with regular, interest sensitive Universal Life insurance, Guaranteed Universal life insurance (GUL) is an excellent life insurance product for many seniors. It offers excellent affordability, inherent guarantees and can even be less costly than term life insurance at some ages.
Coverage is considered permanent unlike term insurance. Its excellent affordability comes in part from the sacrifice of limited to no cash value accumulation during the life of the policy. While being permanent insurance, it is unlike whole life insurance policies which always develop cash value and cost considerably more per thousand of coverage.
For many people, cash value benefits are of no interest. Pure financial protection is all they want to pay for. Guaranteed Universal life insurance is a great option. For a senior citizen, a GUL policy is the way to having the affordability of term life insurance, with the guaranteed protection that a traditional whole life insurance policy offers.
There are a couple of great life insurance companies out there offering policies as little as $25,000.
There are also insurers offering no medical exam guaranteed, no lapse coverage as well.
If you don’t need cash value accumulation in a whole life policy for leveraging money, why pay the higher premiums? Guaranteed Universal Life can deliver level premiums and level death benefits for life, regardless of changes in age or health.
You don’t have to be in perfect health to qualify. However, you must have acceptable health based on the medical underwriting requirements of the particular life insurance carrier. All companies vary in how you will be evaluated medically. Some may be quite critical of your health while another see you as being favorable and makes you a better offer.
Policies can be obtained with death benefits as low as $25,000.
Coverage can be had until age 121. Whether you are considering GUL for any of the common uses above or other goal, this product focuses on pure, permanent protection that can never change even if you health goes way downhill at some point. Your premiums stay level and the death benefit never goes down. In this sense, Guaranteed Universal Life is similar to Whole Life Insurance.
Guaranteed Universal Life Insurance Vs Whole Life Insurance
While both of Guaranteed Universal Life Insurance and Whole Life Insurance are “permanent” life insurance products, there are some key differences. Depending on your goals, one of these permanent products might be more appealing than the other. For example, a life insurance consumer looking for cash accumulation would typically be better served by a participating Whole Life insurance policy due to the lifetime cash value buildup. Combined with the dividends of a good dividend paying participating policy, there is opportunity for solid cash accumulation inside it.
Some whole life insurance consumers purchase them to leverage the cash value buildup in the policy. You can borrow those accumulated funds while still earning compound interest on the money you borrowed and use it elsewhere of your choosing. Any monies you do not repay will be deducted upon death to your beneficiary.
With that said, there is also a considerable cost difference to have the cash value accumulation as well the inherent complications of using those benefits.
For those life insurance consumers looking for permanent, pure life insurance protection with no real cash value buildup inside the policy, a Guaranteed Universal Life Insurance policy is going to be a better and much more affordable option. GUL will get the job done if all you need is a permanent, pure death benefit only policy. While a whole life insurance policy is not complicated, it does have more moving parts than a GUL policy.
Guaranteed Universal Life Insurance Quotes
If you think GUL might be for you, take the time and contact Special Risk Life to get any of your questions answered and a solid quotation for coverage. Obtaining the best guaranteed universal life insurance quotes will definitely require some health questions to see what companies and products would be best for your pocketbook.
The more information a life insurer has in which to evaluate your health, the better the premium typically is.
Now, there are situations where fewer health questions may benefit you, but that should be determined by talking to a professional, independent agent.
At the very least, make sure you’re working with a seasoned, professional especially if your health has slipped from your younger days. You want to have options… do not get overcharged or unnecessarily declined.
We are multi state licensed and can be reached at 800-598-6445. You can also use our quote engine widget to the right to compare rates from dozens of carriers in less then a couple minutes of your time. Be sure to select “lifetime” in the Term length box. That will give you access to GUL rates. Just be sure to understand that final rates are determined by the life insurance underwriter based on your total risk profile.
Conclusion and Summary
I must confess, I am a little biased towards this product. My term life insurance will be expiring in less than ten years. Personally, I like to invest and would rather not pay premiums for a cash value account in a Whole Life policy or a Traditional UL policy. With that all said, upon eminent expiration of my term life coverage, GUL will be on the table to replace it. I will reduce the coverage amount since my mortgage will be long gone and my kids college educated…I won’t need as much coverage anymore. My family and financial obligations will have diminished.
Being an old generation life insurance guy… just means I don’t subscribe to recommending term life insurance to everyone for everything under the sun, I am also not a fan of any life insurance products called an “investment” either.
Life insurance is a financial protection vehicle. In Michigan where I reside, it is illegal for insurance agents/brokers to even elude to life insurance as being an investment unless you are a licensed in securities. There is a reason for this undoubtedly.
Investments involve risk of loss. Life insurance is financial protection. You invest money in the market, index funds, bond’s etc. not whole life or universal life insurance for that matter. Life insurance offers benefits with guarantees. Accruing cash value in a whole life policy is a benefit, not an investment. You pay extra in your premiums to have that benefit. It is just a more “complete” policy that comes at a higher premium.
You really can’t go wrong with Guaranteed Universal Life Insurance if you need affordable, permanent and easy to understand coverage you can depend on thru thick and thin. It combines the best of term life insurance with that of whole life insurance giving you a real affordable option.
If you have a comment or question, don’t hesitate to leave it below. We always like to know questions we have left unanswered to we can improve the site for all of our visitors. Need to discuss your personal situation with us or receive a Guaranteed Universal life insurance quote, give us a call at 800-598-6445 or contact us here.