Guaranteed universal life insurance policies balance the cost of a term policy with the comprehensive coverage of a permanent policy. It’s a blend of features delivering the perks of both types with its unique considerations.
In this article, we will use the term guaranteed universal life or GUL. Still, there are a few other common names for this type of policy, including:
- Secondary Guaranteed Universal Life
- No Lapse
GUL provides more flexible coverage than a term policy because it’s age-specific. Whereas term will cover you for 10 or 25 years, a GUL will cover you until a specified age.
GULs focus on the death benefits, making it less costly than a permanent policy because most don’t have a cash value accumulation portion.
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What is Guaranteed Universal Life Insurance?
Guaranteed universal life insurance combines elements from both permanent and term life insurance. Instead of a term limit, you choose the age until which you’ll be insured – usually between ages 90 and 121. It’s a simple policy, without the extra features of permanent policies, so it’s closer to the cost of a term policy than a permanent one.
The longer the coverage period, the higher the premiums. Keep in mind the average lifespan in the low to mid-’70s, depending on a handful of factors.
Permanent policies differ from guaranteed universal life in the cash value accumulation and coverage period options. Typical permanent policies for cash value include whole life, universal life, and indexed universal life.
However, if you a GUL is right for you, many carriers allow you to add a cash value accumulation. This, in turn, opens up more customization options for your policy.
GUL policies have fixed premiums and a fixed face amount. That means as long as you pay your premiums on time, nothing changes on you. Some companies offer varying premium options. But, for the most part, GULs are nearly as straightforward as term insurance.
Benefits of Guaranteed Life Insurance
Unlike term policies, you never need to renew a GUL. It stays in force until you reach the expiration age you picked when applying. The premiums also remain level for the life of the contract.
The advantage over a term policy is that you’ll never have to renew at higher rates. You also don’t need to worry about getting declined for a new policy if your health slips as you age.
If the cash accumulation portion of a permanent policy calls to you, you may get better returns if you invest the difference you’d pay between a GUL and a permanent policy. Plus, you’ll have more control over investing in what you know.
Reasons to Consider A Guaranteed Universal Policy
GUL works best for someone who needs their life insurance coverage to last for life but isn’t entirely comfortable with the premiums of permanent life insurance. A few companies will even allow you to add the cash value accumulation if you wish.
Guaranteed universal life policies provide locked in, tax-free death benefits for your beneficiary or estate. It can be used for everything from estate planning, buy/sell agreements, charitable trusts, irrevocable life insurance trusts, or go straight to your heirs.
Pros of a Guaranteed Universal Life Insurance Policy
In addition to finding the right life insurance policy to suit your family’s needs, there are some other perks to choosing a GUL.
- Some companies offer flexible premiums
- Particularly low premiums over age 75
- Market volatility doesn’t affect premiums
Cons of Guaranteed Universal Life Insurance
There is no perfect life insurance product. Some may suit your life situation and goals better than others. It’s wise to keep in mind the drawbacks of any policy you’re looking at purchasing for your family.
- Unforgiving premium payment schedule
- Costs more than an equivalent term policy
- Surrender charges if you cancel your policy before the expiration date
- A GUL with a cash value component is much more expensive
Similarities Between Term and Guaranteed Universal Life
GUL policies and term are remarkably similar. They both aim to fill the same niche of a “just in case” policy that most everyone can afford.
They both have:
- Level premiums
- Guaranteed face amount
- No cash value accumulation
- Simple, easy to understand policies
Differences Between GUL and Term Life Insurance
The major differences between term policies and GUL policies show off the advantages of GULs.
- Long period of coverage – age 90 to 121
- Slightly more expensive because of longer coverage
- Costs roughly equalize with a term policy around age 50
Whereas insurers designed term insurance for working folks with kids or a mortgage, GULs cover you for life. They can serve additional needs like estate planning or paying for your funeral. You won’t have the frustration of surviving your term with nothing to show for it.
How to Apply For a Guaranteed Universal Life Policy
Applications for GUL policies work just like any other standard insurance application. You comparison shop policies for pricing and coverage. An independent agent can help you choose between companies if you have a medical condition, so you don’t end up surprised at the premiums.
Virtually all GUL policies require the life insurance medical exam. (Although a few let you skip the exam.) You don’t pay for it. The insurance company covers that. It takes less than an hour, and the medical examiner can meet you on your schedule where it’s convenient for you.
Once the medical exam and application are complete, you will wait a few days to a few weeks for the underwriter to review all of the information. Then they’ll send your insurance agent and offer who will present it to you.
Once you sign the offer, the policy will be “in force,” and you will have coverage so long as you pay your premiums on time.
Guaranteed universal life policies create a tidy solution for families that don’t like the idea of paying money into a term policy only to survive it. They last well beyond the average lifespan and offer simple, straightforward coverage.
If you need coverage longer than a term insurance policy, then a Guaranteed Universal Life insurance policy is the best and least expensive option.
How Abrams Insurance Solutions Can Help
At Abrams Insurance Solutions, we work with over 70 of the top-rated insurers in the country. This lets us compare companies that have better rates for specific jobs or medical conditions. That way, despite what a form tells you, you know that you’re getting the best deal possible.
If you have any questions about guaranteed universal life, give us a call at (858) 703-6178. We’re here to help, and there is never any obligation to move forward.