How Does Guaranteed Universal Life Insurance Work?

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Term life insurance is the most popular type of life insurance and Whole life insurance has been around the longest. No Exam Life Insurance is getting popular, but what about Guaranteed Universal Life Insurance? How does Guaranteed Universal Life Insurance work and is it worth buying?

How Does Guaranteed Universal Life Insurance Work?


Guaranteed Universal Life insurance (also known as GUL) is becoming a very attractive life insurance option. In recent years it has started to become a popular choice for shoppers. The reason for its popularity is that it provides you the opportunity to get lifetime coverage at a price less than Traditional Universal Life and Whole Life insurance.

You can look at a GUL policy as the best of both worlds. It  is similar to Term Life Insurance in that the premiums are affordable and lasts a lifetime like Whole Life. Guaranteed Universal Life will cost more than a Term policy, but not nearly as much as a traditional Permanent Life insurance policy. GUL provides lifetime coverage as long as you select the maximum coverage length.

This article will go over how Guaranteed Universal Life insurance works and the Pros and Cons of GUL.

Guaranteed Universal Life Insurance vs Term Life Insurance


Some life insurance products can be pretty complicated, but Term Life is simple. You select the benefit amount and the length of the term. Luckily, Guaranteed Universal Life is also a simple product.

Similarities of GUL and Term Life Insurance

The GUL is similar to Term Life in a couple of ways.

  1. Guaranteed Universal Life provides level premiums that don’t rise over the life of the policy.
  2. With a GUL, you choose a  level death benefit just like you would withTerm life.
  3. You need to select the duration of your policy with Term and Guaranteed Universal Life.

Differences of Guaranteed Universal Life Insurance and Term Life

The major difference between GUL and Term Life insurance is in the way you select the duration of the policy.

  1. With a Term Life insurance policy, you need to select coverage to a desired term length.
    • The most popular term lengths are: 10, 20, 25 and 30 year terms.
    • The term you choose will determine how long your policy will last.
  2. With Guaranteed Universal Life insurance, you are selecting coverage to a desired age.
  3. GUL has a variety of ages to choose from: 90, 95, 100, 105, and 121.
    • You choose the age and your GUL policy will provide a death benefit up to that age.

Guaranteed Universal Life Insurance Features


GUL has several features that you should be aware of before deciding on a life insurance policy.

  • Level Premiums. Guaranteed Universal Life has premiums that are guaranteed to remain the same. They will not increase, but you must pay your premiums on time or you run the possibility of your policy lapsing.
  • No Cash Value. Guaranteed Universal Life was not made to accumulate cash value like Whole Life or traditional Universal Life insurance. The GUL policy were designed with setting a premium that will cover the cost of insurance. This is how the majority of GUL products are designed. It should be noted that there are some cases of GUL policies that provide a return of premium once a certain time has passed.There are even a few instances of cash value GUL, but this is very uncommon.
  • Coverage to Specified Age. Guaranteed Universal life will provide coverage to a specific age. You may select a GUL policy to the following ages: 90, 95, 100, 110, 121. The GUL premiums will be higher as you go up the age brackets.

Guaranteed Universal Life Insurance Pros


Guaranteed Universal Life is gaining popularity and for good reason. Here are a few reasons why people are favoring GUL over other life insurance policy types.

Simplicity. GUL is not confusing and is a straight forward product just like Term Life insurance. There are permanent life insurance products that are very complex. Products such as Whole Life, Index Universal Life, Universal Life and Variable Universal Life all have complexities that many shoppers don’t want to deal with. With Guaranteed Universal Life, you simply pay your premiums and you have coverage to the age you applied for.

Customizable. Your GUL life insurance policy can be structured to the specific age you apply for. By selecting age 121, you are guaranteeing that you will have lifetime coverage.

Affordable. You are paying for a life insurance policy without any of the bells and whistles. These little extras that Permanent Life insurance contain increase the premiums of Whole Life and Traditional Universal Life policies. Those polices are designed for cash accumulation and your premiums reflect that, but not with GUL.

 

Guaranteed Universal Life Insurance Cons


Guaranteed Universal Life insurance does have its drawbacks. Here are some examples why GUL might not be the best fit for you and your life insurance goals.

Cash Accumulation. For some life insurance shoppers, cash value is an important part of what they’re trying to accomplish with their policy. Unfortunately, GUL is not an appropriate solution for this goal. Guaranteed Universal Life typically does not accumulate cash value like Traditional Universal Life, Whole Life and other Permanent Life insurance policies. The little amount that your GUL policy may accumulate could make your policy lapse or lower the death benefit if you were to borrow against it.

Expiration. Are you thinking of selecting a GUL to age 90, 95 or even 100? Be aware that people are living longer due to modern medicine, diet and exercise. You run the risk of outliving your coverage unless you select a GUL to age 121. This gives you the best opportunity to truly receive lifetime coverage.

Inflexible. There are some life insurance policies that you can adjust the premium, death benefit and when you pay for the policy. Guaranteed Universal Life is not one of these flexible life insurance policies.

How Expensive is Guaranteed Universal Life Insurance?


Cost of life insurance is often times the number one factor when purchasing a policy. Let’s look into how much a GUL policy to Age 121 would cost. This policy would cover the insured for 66 years! Below are the annual premiums for a 55 year old male and female with “Preferred” non smoker rates.

Male GUL to Age 121 Female GUL to Age 121
$100,000 $1,331 $100,000 $1,166
$500,000 $5,775 $500,000 $5,039
$750,000 $8,662 $750,000 $7,559

 

Now let’s compare the GUL annual premiums to Term Life insurance rates. We’re still comparing a 55 year old male and female, but this time we’ll select the longest Term Life policy. Below are sample rates for a 30 year term life policy with “Preferred” non smoker annual premiums.

Male 30 Year Term Female 30 Year Term
$100,000 $858 $100,000 $597
$500,000 $2,959 $500,000 $2,100
$750,000 $4,409 $750,000 $3,120

 

Is Guaranteed Universal Life Insurance Worth the Cost?


Comparing the GUL rates with the Term Life rates, you can quickly see that GUL is more expensive. Is the higher premium worth the added cost? For many, it absolutely is.  In the examples above, the GUL is approximately twice the cost of the Term Life policy, but you’re getting coverage for 66 years with the GUL.  The 30 year term will run out when the insured is 85 years old and the GUL covers to age 121.

It is very common to live past age 85 today. Advances in medicine, health and diet are improving our lives. If you outlive your term policy and want to get a new policy at age 85, you’re going to very limited in your choices. You won’t have the opportunity to buy traditional term life with a death benefit of $100,000 or more. If you buy annual renewable term life insurance, it is going to very expensive. More than the GUL in the examples above.

The Guaranteed Universal Life insurance is worth the cost if you’re main goal is to have life insurance for your entire lifetime. If your life insurance goals are only for protecting in the short term, then Term Life may be a better option.

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Michael Quinn

Michael Quinn is the founder of LifeInsuranceBlog. If you have specific questions or face challenges getting coverage. Please email or call me a call at 888-411-1329 - Either way, I'm happy to help you.

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