What are you looking for in a life insurance policy? The first thing you’re probably thinking about is coverage that will help your spouse, children, and grandchildren when you are gone, but price might also be a big consideration. If so, you should look into guaranteed universal life insurance. A guaranteed universal life insurance policy provides permanent life insurance coverage, without the higher price tag of regular universal life insurance. But before you choose this type of policy, you should be aware of all its pros and cons, in order to make sure it works for you and your needs.
Guaranteed Universal Life Insurance Vs Whole or Term Life
Guaranteed universal life insurance, also known as “No Lapse” insurance, is an affordable way to buy permanent protection, and can be viewed as a kind of middle ground between term and whole life insurance. For some people, whole life insurance might be too expensive; others might like the price of term life but want coverage for a longer period of time than term life insurance offers. Guaranteed universal life insurance might be the answer, although you need to know what you are and aren’t getting with this type of policy.
Like whole life, guaranteed universal life lasts your entire life, but, unlike whole life, it doesn’t build cash value over time. Because there is no cash value building up, your monthly payments will remain low, and you do not have management fees (like whole life), making this type of life insurance policy financially doable for most people.
Guaranteed universal life insurance is similar to term life insurance in that it has fixed rates that will not change throughout the life of the policy. But there is one major difference between these types of policies: while term life policies last for a specific number of years, guaranteed universal life insurance policies last until you reach a specific age. For example, when you sign the policy, you will choose an age for when the policy ends; most companies’ choices include ages 90, 95, 100, 105, 110, or 121. The older you are when purchasing a policy, the higher the price of your premiums will be.
Pros Of Guaranteed Universal Life
The above similarities and differences between guaranteed universal life and whole and term life mean that there are both advantages and disadvantages to this type of policy, and you’ll have to carefully weigh these pros and cons before making your decision. First, let’s take a closer look at all the positive things that guaranteed universal life insurance has to offer:
Guaranteed Fixed Premiums & Death Benefits
As mentioned above, guaranteed universal life’s premiums will remain at a fixed rate throughout the life of your policy, meaning there will be no increase in rates until you reach the age at which your policy is set to expire. This could make one of these policies more desirable than non-guaranteed universal life insurance: with these policies, your investment or cash value has to perform well, otherwise your rates will increase.
In addition, with a guaranteed universal life policy, your death benefit will never change, which means when you pass away, your beneficiary is guaranteed to receive the amount agreed upon when you purchased the policy. The cash value that whole life policies accumulate is essentially a loan, and will be taken out of the benefits your beneficiaries will get when you pass away; guaranteed universal life does not accumulate cash value, so you will not have to worry about your loved ones getting less money when you are gone.
No Market Risk
Unlike whole life or regular universal policies, a guaranteed universal life policy has no cash value. This can be a positive thing, because the money your beneficiaries will receive will not be tied to the performance of investments in the stock market, and you will not have to worry about the market or interest rates.
A universal guaranteed life insurance policy will have lower premium rates as compared to non-guaranteed life insurance policies because you will not have to pay extra to accumulate cash value (because there is no cash value). The monthly premium price of non-guaranteed universal life policies is about 3-4x those of guaranteed universal life policies!
Easy To Understand
These policies are very simple and easy to understand: you pick the amount of coverage you want and the age you want your policy to last until, and you will pay the same fixed premium throughout the life of your policy. Your premiums are locked in and will not increase as you age.
Cons Of Guaranteed Universal Life
Some of the above differences between guaranteed universal life insurance and other types of policies could be seen as drawbacks. For example:
No Cash Value
If you would like to build cash value that you can use at some point as a loan, or to help pay for your premiums, you will not get it with this type of life insurance.
No Flexibility On Payments
With regular universal policies, you have the option to miss or skip payments by building cash value in your policy, but you do not get this type of flexibility with guaranteed universal life insurance. Instead, if you miss a payment, you run the risk of losing your policy.
With some life insurance policies, you can skip the medical exam, which is helpful to those who have major pre-existing conditions. Unfortunately, guaranteed universal life does not offer this advantage: you will be required to undergo a medical exam when applying for your policy.
More Expensive Than Term Life
Term life insurance offers you coverage for a set number of years (10, 20, 30 years), and after that time has passed, you will need to purchase a new policy, or choose to renew your policy at a higher rate. The one advantage to this is that it keeps premium prices lower than those of other policies, including those of guaranteed universal life policies. Because guaranteed universal life policies offer guaranteed coverage until you reach old age, they are more expensive than term life policies.
Weighing Your Options
As with most types of life insurance, guaranteed universal life insurance policies have some very strong advantages, as well as some downsides that you need to consider before making your choice. When deciding on a life insurance policy, consider using online tools to see what is available, as well as working with an agent who will help you compare plans and see which is the right fit for you. To get you started, we have provided the top insurance companies that offer guaranteed universal life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.