If you’re looking for affordable life insurance that lasts for your lifetime, guaranteed universal life may be the answer. This insurance policy is the best of both worlds between term life and permanent life insurance policy.
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While it’s not the least expensive policy available today, it is more affordable than its other permanent life insurance counterparts and is an excellent option for seniors looking for permanent coverage.
We review GUL insurance, how it works, and its pros and cons below.
What is Guaranteed Universal Life Insurance?
Guaranteed Life Insurance (GUL) is a permanent life insurance policy with a term death benefit. As long as you pay your premiums, your policy stays intact for your lifetime. What sets it apart from other life insurance policies is its guaranteed death benefit.
Guaranteed universal life is a cross between term life insurance and whole life insurance providing an affordable option for consumers who want a long-term policy without the expense of whole life.
You never have to worry about the death benefit expiring or decreasing. It remains the same for your lifetime.
How Does it Work?
Guaranteed life insurance offers the lifetime coverage many people need without the expense of whole life insurance. But it also doesn’t have the frills that whole life insurance has, so keep that in mind.
GUL’s premiums stay the same for the life of the policy, and it has a ‘no lapse’ guarantee, which means as long as you pay your premiums, you have coverage.
Something to keep in mind, though, GUL insurance doesn’t have a cash value. In a standard universal life insurance policy, you have your death benefit and a cash value. The cash value is why universal life insurance policy premiums are much more expensive, but they are also riskier because your balance depends on the market’s performance.
On the flip side, without the cash value, you have nothing to back you up if you can’t pay your premiums. You have to pay them, or you lose your death benefit.
Think of guaranteed universal life insurance like term life insurance for the rest of your life. You don’t have to worry about outliving the term. You have coverage for your lifetime, which ensures your loved ones are protected.
Guaranteed Universal Life Pros and Cons
- Your premiums remain the same for the entire policy. They never change based on age, illness, or other factors (as long as you pay your premiums).
- Your death benefit remains level for the entire policy. Whether you die next year or 15 years from now, your death benefit remains the same.
- Your policy isn’t tied to an investment. You don’t have to worry about the value rising and falling. You only pay for the death benefit in your premiums.
- The policy is straightforward. There aren’t any confusing formulas or interest rates to worry about. GUL is simple and easy to understand.
- You can decrease your death benefit. If your financial circumstances change and you don’t need as much insurance, you can reduce your coverage.
- There may be a return of premium possibility. Some guaranteed universal life policies offer a return of premium if you cancel or surrender your policy. Some insurance companies allow you to cancel your policy in year 20 or 25 (each policy differs) and get some or all of your premiums back.
- There is no cash value. While this can be a ‘pro’ for some, most permanent life insurance policies have some sort of cash value to fall back on, but GUL insurance has none.
- The premiums are higher than term life insurance. Guaranteed universal and term life insurance are similar, except for the term, but GUL premiums are much higher than term life insurance premiums.
- You’ll need a medical exam. All guaranteed universal life insurance policies require a medical exam. While the exam itself is fine, it can make it harder for older or less than healthy people to get coverage.
What are the Costs?
The cost of guaranteed universal life insurance depends on the life insurance company you go through and the type of policy you choose.
Most life insurance companies offer policies that are payable through a specific age. For example, most companies have policies paid through age 90, 95, 100, 105, 110, or 121 (lifetime).
The longer the paid through date is, the more your premiums cost. That’s because the longer you have coverage, the more likely it is that the insurance company will have to pay out on a claim.
You can secure guaranteed universal life insurance at any age up to age 80 usually, but the older you get, the more the premiums cost.
For example, a 40-year old male buying GUL payable to age 90 with a $500,000 death benefit will pay around $250/month, whereas a 65-year old male would pay $771/month for the same coverage.
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Females typically pay lower rates because they have a longer life expectancy. A 40-year old female buying GUL payable to age 90 with a $500,000 death benefit will pay around $220/month and a 65-year old female would pay $650/month for the same coverage.
Who Should Buy Guaranteed Universal Life Insurance?
Anyone could benefit from this type of policy, but certain people benefit the most.
If you don’t have a lot of money saved for your final expenses or leave your loved ones when you die, a GUL insurance policy is a great alternative. You don’t have to worry about outliving the policy and your loved ones will be protected.
In addition, people in certain situations benefit from GUL, including:
- Parents of a special needs child
- Business owners
- Anyone who wants to leave behind a legacy
- Seniors whose term policy ended but still need coverage
- Anyone who has debt that will last into their senior years
Who Shouldn’t Buy Guaranteed Universal Life Insurance?
Guaranteed universal life insurance is a great option for most people, but if you’re looking for an investment or return on your premiums, you won’t find it with GUL. If you can afford the higher premiums of universal life or whole life policy, you’ll earn the returns you hoped.
- How does GUL insurance work for seniors?
Guaranteed universal life insurance is the best way for seniors to get lifetime coverage without paying the high premiums of whole or universal life insurance. Most companies allow you to buy GUL up to age 85, but the older you get, the higher the premiums get. Some companies also let you accelerate your payments while living if you’re diagnosed with a chronic or terminal illness.
- What are the disadvantages of this policy?
GUL is a great policy for most people, including seniors, but it does have higher premiums and no cash value. These are the two most significant disadvantages because of the financial downsides. Seniors often pay much higher premiums on GUL, too, since they have a higher risk of dying than a young, healthy person.
- Is guaranteed universal life insurance worth it?
GUL is worth it if you don’t have a term life insurance policy or you think you’ll outlive it. GUL is the most affordable version of permanent life insurance. While it doesn’t have a cash value, most seniors don’t need the cash value. They just want guaranteed coverage for their loved ones.
Companies offering guaranteed universal life insurance:
Many life insurance companies offer GUL, but the top companies that seniors should consider include Prudential, Protective Life, AIG, and Lincoln Financial Group. Like any life insurance, make sure you shop around and compare premiums. Make sure you compare apples-to-apples, though.
For example, don’t compare the premiums of a $250,000 policy to a $500,000 policy or the premiums of a policy paid to age 90 to a policy paid to age 100.
You need to shop around to compare the rates. Here is our comparison tool.
If you’re thinking about adding life insurance to your financial plan, consider guaranteed universal life, especially if you’re a senior with no life insurance. It’s the most affordable permanent life insurance option available today.
While you need a medical exam, if you’re in decent health, you should be able to secure affordable rates for GUL life insurance given your age, giving you peace of mind as you live out your golden years.