What Is Guaranteed Universal Life Insurance?
This policy is somewhere in between term and whole life insurance, though the cash value is limited.
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Guaranteed universal life insurance (GUL) is a type of life insurance that builds cash value over time and can last until you die. The death benefit paid out to beneficiaries is guaranteed as long as you’ve kept up with your premium payments.
GUL can be a cost-effective option for people who find that term life insurance or whole life insurance don’t quite meet their needs.
» MORE: Types of life insurance
How does guaranteed universal life insurance work?
Guaranteed universal life insurance strikes a balance between term life insurance and permanent options like whole life insurance.
Similar to whole life insurance, guaranteed universal life insurance can last until the end of your life. While guaranteed universal life insurance isn’t as cheap as term life insurance, it’s cheaper than whole life insurance — but it also accrues less cash value over time. The cash value grows at a fixed rate set by the insurer, though the growth is fairly minimal compared to other types of permanent policies.
The “guarantee” in guaranteed universal life insurance refers to the death benefit, which is guaranteed to pay out to your beneficiaries as long as your premiums have been paid on time and in full. (Alternatives such as variable life insurance or indexed universal life insurance require a more hands-on approach, so they can be riskier or harder to manage.)
Despite the similarity in names, guaranteed universal life insurance isn’t the same as guaranteed issue life insurance, which is a small policy you can buy without taking a health questionnaire or medical exam.
Pros and cons of guaranteed universal life insurance
Coverage can last until the end of your life.
Lower premiums than whole life insurance.
Death benefit is guaranteed as long as you’ve kept up with your premiums.
Cash value accumulation is limited.
Missed payments might cause the policy to lapse without paying out.
Application might require a medical exam.
Guaranteed universal life insurance: Key facts
How long does guaranteed universal life insurance last?
When you buy guaranteed universal life insurance, you choose a “guarantee period” that lasts until a certain age — typically between 90 and 121. The policy remains in effect until the chosen age, so choosing 121 years could effectively keep a guaranteed universal life insurance policy active until death.
If you choose an earlier expiration age, you may be able to extend the coverage, but the new premiums could be significantly more expensive.
How much does guaranteed universal life insurance cost?
Guaranteed universal life insurance is less expensive than permanent life insurance coverage such as whole life because it doesn’t prioritize cash value growth. This may appeal to applicants looking for simple, lifelong, affordable life insurance. If you’re older and aren't interested in building up an investment, guaranteed universal life provides a way of getting coverage for the rest of your life.
When compared with regular universal life insurance, guaranteed universal life premiums for older applicants are usually lower — this is because the cash value growth is minimal.
» MORE: Average life insurance rates
Who is guaranteed universal life insurance for?
Guaranteed universal life insurance might be a good fit for seniors who might otherwise have trouble finding a life insurance policy. Life insurance rates are generally based on age and health, which means affordable life insurance for seniors can be hard to get. Term life insurance is the cheapest option on the market, but it’s often unavailable to applicants in their 80s. And whole life policies can get very expensive later in life.
This is where guaranteed universal life policies can help fill the gap. It's an option when term life is no longer available, and it's less expensive than a whole life policy at an older age. Plus, issue ages for guaranteed universal life policies can reach into the 80s, making coverage available to older applicants.
How flexible is guaranteed universal life insurance?
Guaranteed universal life insurance offers a little bit of flexibility, which is part of its appeal.
Similar to other types of universal life, guaranteed universal life can offer the ability to adjust the coverage amount, policy length or frequency of payments as your needs change. However, to maintain the policy’s guarantees, you’ll need to pay premiums in full by the due date.
Some policies also come with a return-of-premium rider. Life insurance riders are features you can add to a policy to customize coverage. A return-of-premium rider refunds all or some of the premiums you have paid if you cancel the policy, typically within a specific window of time.
Before you buy
Choosing the right type of life insurance often comes down to your individual needs. Ask yourself why you need coverage. Term life insurance is typically sufficient for young people who are looking to lock down coverage, as well as most families.
However, if cash value growth isn't a priority, and you want a comparatively low-cost coverage solution that is likely to last a lifetime, guaranteed universal life may be worth considering.
» MORE: Life insurance policies
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