Guaranteed Universal Life Insurance Pros and Cons

A guaranteed universal life insurance or GUL is a type of universal life insurance, which is a permanent life insurance policy. It provides a fixed premium rate but it is unique in many ways.

Unlike the term life policies where the coverage is based on term periods, a GUL coverage is based on age. This means that when you take out a GUL insurance policy, you wouldn’t be choosing a coverage for 10, 15, 20, 25, or 30 years. Instead, you will be choosing a specific age in which you want the coverage to last until.

For example, you can choose to stay covered by the policy until you reached 90 years old, 95 years old, or 100 years old. Many GUL insurance policies even offer a coverage of up to the age of 121.

With the guaranteed universal life insurance, your premium rate is fixed throughout the life of the policy. So, when you choose to get a coverage until you reach 90 years, for example, you will be paying the same amount until you reach that certain age. When you die while the GUL policy is still active, your beneficiaries are guaranteed to receive the death benefits.

Take note that the higher age of the coverage, the higher the rates. This means that a GUL policy that gives a coverage of up to 90 years old will have a lesser premium than a GUL coverage for up to 100 years old.

Another important aspect of the guaranteed universal life insurance is the absence of an investment component in the form of cash value. Take note that this cash value is very common most of the permanent life insurance policies.

In a nutshell, the guaranteed universal life insurance is a hybrid between a term life insurance policy and a permanent life insurance policy.

Basically, you’re getting the best of both of these policies when you choose a GUL. This comes from the fixed period (and premium rate) that’s common in term life policies and the permanence of coverage that’s typical of permanent life insurance products. This is why a GUL is also sometimes called a “term for life” policy.

The GUL is also often referred to as a “no lapse” insurance because being age-specific, there’s a great chance that the policy will outlive you or the coverage might last beyond your own lifetime. It’s another way of saying that you will certainly die first before the policy expires. And this guarantees a higher chance that your beneficiaries will receive your death benefits.

And just like any type of life insurance policy, the guaranteed universal life insurance has several advantages and disadvantages.

Advantages of a Guaranteed Universal Life Insurance

The guaranteed universal life insurance is beneficial due to the following reasons:

The premium rate is fixed

The GUL provides a fixed premium, which means you’ll pay the same amount regardless if you age or develop a medical condition. Basically, the premium rate is completely level throughout your lifetime, especially if you choose a much longer coverage. This is an ideal option if you’re looking for predictability in the premium payments. This benefits you greatly if you have a fixed income and you can’t afford to readjust your budget.

The policy does not expire

As a permanent type of policy, GUL has technically no expiration date. And because it is age-specific, you will most likely stay covered throughout your lifetime, this means coverage to age 90 or 121 depending on the policy. This saves you the trouble and expense that come with renewals that are very common with term life policies. If you choose a coverage for the higher age, the likelihood of this happening is also very high.

The coverage is guaranteed

As its name suggests, GUL guarantees you an almost lifetime coverage as long as you pay the premium. When you take a GUL policy, you can be sure that your family is guaranteed to get tax-free death benefits when you die. This is a perfect choice if you want to be certain that your family will get a monetary inheritance or have the money to pay off some debts when you pass away.

There’s no investment risks to worry about

Unlike the other permanent life insurance policies such as the whole life insurance or the non-guaranteed universal life insurance, the GUL policy has no big cash value that grows over time depending on the status of investments that are tied to it. Without this investment component, you would not have worry about any risks of losing money just because the investment under-performed.

It’s simple and straightforward

A GUL policy is very simple and designed without any other frills involved. This makes it very easy to understand and it helps you avoid dealing with other complexities that are common in permanent life insurance policies that have a lot of features. This simplicity is also helpful when it’s time for you compare the same type of product from different insurance companies.

It’s relatively affordable

Because the GUL is simple, straightforward, and has no other frills, this policy is relatively more affordable than the other feature-rich permanent life policies.

Disadvantages of a Guaranteed Universal Life Insurance

Depending on your specific needs, the guaranteed universal life insurance also comes with the following disadvantages:

It requires timely payment

To keep the GUL coverage active, you should pay the premium regularly and in a timely manner. Otherwise, you risk losing the policy.

It’s more expensive than the term life insurance policies

Although GUL is more affordable than other permanent life insurance policies like whole life insurance or other types of universal life insurance, it is more expensive than term life insurance policies. In term life insurance, the premium is lower because there’s a greater chance that your policy will expire. With GUL, however, the insurers are compensating the certainty of a payout because your death benefit is guaranteed.

No cash value that you can use for emergency expense or premium payments

Although the absence of cash value may be beneficial, it can also be a disadvantage if your particular situation requires an accessible source of funds which you can tap for emergencies. A cash value can also be used to cover premium payments, and you wouldn’t have this luxury with GUL.

It requires a medical exam

A GUL insurance policy usually requires a medical exam. This could pose as a problem if you have a poor health condition or you’re simply not comfortable with blood tests and other medical procedures that might be conducted to assess your health risks. Term life insurance plans have no exam options available.

Alternatives to Guaranteed Universal Life Insurance

If you find that a guaranteed universal life insurance does not suit your specific needs, then the term life insurance and the whole life insurance are two of your best alternatives.

Term Life Insurance

The term life insurance is a term-specific type of policy. This means that the coverage is set at a specific period, such as 10, 15, 20, 25, or 30 years. The coverage ends once the term expires, but you’ll have the option to renew the coverage annually. And this is only possible if the insurer that you chose provides a policy renewal. Otherwise, you might need to reapply for a coverage.

If coverage renewal comes with the policy, you can normally renew the coverage up until you reach 95 years old. It is worth noting though that every time you renew, the premium rate increases because the insurer will take into account your age during the time when you applied for a renewal. However, you’d be locked into your initial health rating.

Basically, your premium will increase as you advance in age. To avoid paying a higher premium, your option is to find an insurer that allows their policyholders to pay a fixed premium rate. Just remember that the trade-off is a lower coverage amount.

The best thing about a term life insurance is its simplicity. It also has no cash value build-up or any other additional features that usually cause an increase in premium rates. In most cases though, it comes with a terminal illness rider or an accelerated death benefit rider.

In terms of your options in this type of policy, you can choose between a term life insurance or a decreasing term life insurance.

The former provides a fixed premium rate, fixed coverage period, and a fixed face amount throughout the life of the policy.

The latter also provides a fixed premium rate, but the coverage amount decreases over time as you age. This is usually ideal for people who need a coverage as a financial buffer for an existing mortgage or other types of debts or loans that also reduce in an amount over time.

Whole Life Insurance

The whole life insurance is considered as the most basic type of permanent life insurance. It provides a fixed coverage amount and a level premium. And as a permanent policy, it also comes with a savings component in the form of cash value that grows with interest.

Compared with the term life policy, the whole life insurance has the higher premium due to the guaranteed death benefits and the savings component. But this also means that when you take out a whole life insurance policy, you are not only assured of a death benefit, but you also get another source of money which you can access anytime when you need it. Take note that the cash value component has a guaranteed rate of return, but it takes a long time to build up value as some time initially is spent paying off the fees.

How Does GUL Compare with Term Life and Whole Life Insurance

To compare how GUL fares in comparison with the term life insurance and the whole life insurance, it is important that we reemphasize what these latter policies are.

A term life insurance provides a guaranteed coverage amount and a level premium, but it expires and there’s a high possibility that you will outlive the policy. And when it does, you might be already too old and you’re in a situation where you don’t have a coverage just when you need it most. Your only option is to renew the policy or to re-qualify for a new coverage.

A whole life insurance also provides a guaranteed coverage amount, and although this policy is permanent, it comes with a higher premium rate because it has a guaranteed cash value component.

Now, if you’re looking for a policy that doesn’t expire or has the permanence offered by whole life insurance but also seeking simplicity and lower premium rate which are similar to the one offered by term life insurance, then your best option is the guaranteed universal life insurance.

Basically, the GUL policy gives you the advantages of the whole life insurance and the term life insurance and it helps you avoid their disadvantages. This is the perfect policy for you if you’re a bit older and if you’re someone whose life insurance needs require a permanent coverage, a fixed premium rate, and a guaranteed death benefit. It is even more ideal if you don’t need cash value as the cash value build up here will mostly be used to keep your premiums level.

Guaranteed Life Insurance Quotes from Multiple Companies

Shopping around for the best life insurance products that matches your exact needs and situation is not always easy.

With so many things to consider and with a lot of information that you need to learn, sort out, and understand—from premium rates and coverage amount to term periods and other policy features—it is easy to get overwhelmed and make a wrong decision. You can avoid making a mistake and allow yourself to get the right policy without hassles if you work with us.

At no extra costs, we can do all the work for you by getting all the quotes from different life insurance companies and help you determine what’s the best policy that you should get based on your particular situation. You can even save up to 58% on your chosen life insurance policy if you work with us. To get started, you can call us at 212-573-5563 or take a look at our online life insurance quotes so we can get back to you immediately.