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 the 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 of traditional UL policies. We are focused here on what is known as Guaranteed Universal Life Insurance.
To start you off in the right direction, I will tell you what it (GUL) is not first.
This is not guaranteed acceptance life insurance (guaranteed issue life insurance) which is the most expensive life insurance and designed for high risk life insurance applicants. This certainly does not benefit those in decent health nor their families.
Second, though this 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. Traditional UL does not offer guarantees that your policy would not lapse if the interest rates drop beyond the assumptions built into it.
Guaranteed Universal Life (GUL) offers a “no-lapse” guarantee in the policy. GUL is a permanent life insurance product offered by a number of life insurance companies. It has features of both term life insurance (lower cost) and whole life insurance (permanent coverage). The weakness of traditional UL is patched by inserting the “no lapse” guarantee provision into the policy whereby your policy will not implode as long as you pay the necessary premium to maintain it.
Coverage lengths run to age 90, 95 or all the way to age 121. You select what age you want coverage to run to.
Why are some life insurance consumers turning to it versus other life insurance products?
First, it offers guaranteed values, and fixed, level premiums for starters.
Second, 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.
Third, it does not have the risk of implosion due to lower than anticipated interest rates like a traditional UL policy which could require more premiums if cash value and/or interest rates cannot cover the cost of insurance without a premium increase.
Term life insurance is temporary coverage. It is for consumers who have a specific date when the life insurance is no longer needed.
Many people just see whole life insurance as overly expensive. In some cases, I do agree.
Is cash value accumulation in your policy of interest to you?
If not, what are you trying to accomplish?
Are your needs indefinite…in other words do you have the need for a permanent policy?
With the strong possibility of outliving term life insurance in our modern medicine era, Guaranteed Universal Life Insurance a permanent type of insurance, offers you guaranteed, no lapse coverage without paying for cash accumulation built into a more expensive, whole life insurance policy.
You could call guaranteed universal life 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 a hair raising premium 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.
Level premium, 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…No Lapse Universal Life Flexibility
While Guaranteed Universal Life (sometimes mistakenly called universal guaranteed life insurance) is considered permanent insurance like Whole life, it is a bit different.
First, these policies generally 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 an older, traditional UL policy has been challenging for many people. Interest rates back in the 80’s were considerably higher. The policies issued by the life insurance companies did not model such low rates and the premiums required doubled for many people over the last couple decades. Interest rates tanked and assumptions in those policies no longer generated the funds to keep the policy maintaining its full value.
Cash values in many policies issued in the 80’s and 90’s required over funding to maintain full benefits.
Low interest rates prior to 2021 hit those policies hard. As a rule, those policies under performed.
This is the way things work with traditional universal life. That is also 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.
The culprit, plummeting interest rates and the cost of annually renewing term life insurance create a semi complicated product.
Traditional Universal Life is not a policy you can throw in the fire safe and call it good.
There is a great solution though…
A Guaranteed Universal Life policy (GUL) eliminates interest rate risk because it has a no lapse guarantee built in.
Premiums are level for the duration of coverage. The policy death benefit 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 GUL 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.
Guaranteed Universal Life Insurance for seniors can offer large amounts of financial protection, guaranteed for a very affordable cost up to the ripe old age of 121. This is the closest alternative to whole life insurance without paying the higher price tag attached to a comparable size policy.
For many people, cash value benefits are of no interest. Pure financial protection (death benefit) 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 great life insurance companies out there offering policies with death benefits starting at $50,000.
I’d recommend that you run our free, instant quote tool on this page to find out how affordable this product is for you.
Be sure you enter “Lifetime” under the “Coverage” drop down menu on the tool. This will lock in permanent, guaranteed universal life insurance rates from dozens of companies showing you all the apples to apples pricing. Takes less than a minute to complete.
No Exam Guaranteed Universal Life Insurance. Is It Available?
Yes it is. You must be under age 66 to have the option for no exam guaranteed universal policies.
If so, no needles or waiting for a paramedical exam in your home if you choose a “no exam” application.
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 either. If you are over 66+ and need the medical exam, no worries. Some GUL policies are designed to accept people to age 85!!
However, you must have acceptable health based on the medical underwriting requirements of the particular life insurance carrier. There are health questions you must answer to qualify for coverage.
All life insurance 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 $50,000.
Coverage can be guaranteed until age 121.
Whether you are considering GUL for any of the common uses above or other goals, this product focuses on pure, permanent protection that can never change even if your health goes way downhill at some point.
Furthermore, your premiums stay level and even the death benefit never decreases.
In this sense, Guaranteed Universal Life is similar to Whole Life Insurance and can be used for policy values of $50,000 on up.
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 that can be used as a living benefit.
Typical whole life insurance consumers purchase them to leverage the cash value buildup in the policy or for final expense, burial coverage. Whole life is offered in smaller, permanent policies which may meet their needs better.
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.
If you think GUL might be for you, take the time and contact Special Risk Life to get any your questions answered and a solid quotation for coverage.
Take 1 minute and use our instant life insurance quote tool on this page.
Be sure to select “Lifetime” under the “Type of Insurance” drop down menu. That will display guaranteed universal life insurance quotes for you.
Be realistic about your health assessment. If you are a bit heavy, have diabetes, cholesterol issues… don’t select Preferred Plus.
Preferred Plus are people in optimum health. Remember, this is not an offer from the insurer, just their rates if you qualify for that rate class.
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 or a no exam policy may benefit you, but that should be determined by talking to a professional, independent agent who has the experience to advise you as to your best option.
I can’t stress this enough…
Obtaining the best guaranteed universal life insurance quote will require a general health consultation with a seasoned advisor to ultimately see what companies and products would be best for your pocketbook.
Make sure you’re working with an independent professional broker 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 269-230-3464. 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 the final premium are determined by the life insurance underwriter based on your total risk profile.
Quotes are simply a general estimate, not an offer of insurance. The “offer” comes after the application has been evaluated by the life insurance company who will be obtaining various records such as medical and driving history etc.
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 at this point and it is on the radar for my own needs.
A Guaranteed Universal policy is a good life insurance solution for someone quite healthy in their 50’s that needs permanent coverage.
Term life insurance cannot guarantee coverage long enough and I do not want to outlive the protection.
I also do not necessarily need cash value accumulation inside a policy. However, I do need $50,000 + in coverage to meet my planning goal.
For me, no lapse, guaranteed universal life is the financial tool to get the job done most affordably to a ripe old age.
Benefits of Guaranteed Universal Life Insurance
- Your cost of insurance coverage will not change regardless of any change in your health
- Lower cost of insurance per thousand than Whole Life Insurance. Has “Term like” cost
- You not paying for cash value accumulation pouring extra cash into your policy
- You are paying only for pure life insurance protection
- Does not have the pitfalls built into other forms of universal life policies due to written contract/policy guarantees
Being an old generation life insurance guy…
You will find I don’t subscribe to recommending term life insurance to everyone for everything under the sun.
No Lapse, guaranteed universal life insurance is a newer type of life insurance. It was built to merge the benefits of both whole life insurance and term life insurance affordably.
Is it one sizes fits all then?
The average life insurance policy is a financial protection vehicle. You may have a specific time you need the coverage or it may be unknown.
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 269-230-3464 or contact us here.
Special Risk Life is a veteran independent life insurance agency that specializes in guiding people with even the toughest health conditions thru the life insurance process. We are very passionate about helping people get the financial protection they want while delivering affordable coverage people can absolutely count on.