If you want the ultimate in stability with your life insurance, then you’ll want to look into guaranteed universal life insurance. These types of plans offer the most stability for your beneficiaries after death. Below we’ll look more into what this type of insurance is and who should consider it.
- What is Guaranteed Universal Life Insurance?
- Common Product Features of Guaranteed Universal Life Insurance
- Guaranteed Universal Life Insurance Riders
- Pros and Cons of Guaranteed Universal Life Insurance
- Whom is It For?
- How Much Does Guaranteed Universal Life Insurance Cost?
What is Guaranteed Universal Life Insurance?
Unlike indexed universal life insurance or variable universal life insurance, you do not use this type of life insurance to invest or link to stock market performance for added cash value. So if you’re not interested in investing, this might be the plan for you.
This type of plan offers a guaranteed death benefit. A guaranteed death benefit simply means that one fixed amount will go to your beneficiaries upon your death. You often don’t have the option to adjust your premiums. You simply pay a set premium to maintain coverage for as long as you’d like. This aspect is similar to term life insurance, fixed premiums and guaranteed coverage amount, which is also the same as death benefit in this case since there is no cash value account.
However, it is different from term life insurance is that in term life insurance, your beneficiaries only receive death benefit if you pass away during the term. On the other hand, your beneficiaries in guaranteed universal life insurance will receive death benefits as long as your policy is still in force when you pass away. It’s a type of permanent life insurance.
Common Product Features of Guaranteed Universal Life Insurance
Some of the product features at a glance include:
- An option where you have the most permanent coverage with the lowest premium possible. Similar to whole life insurance, guaranteed universal life insurance offers guaranteed permanent coverage or face value or death benefit; however, at a much cheaper price. In fact, when we compare the quotes of the two policies, guaranteed universal life insurance cost is less than 40% of whole life policy’s cost.
- A situation where your death benefit and premium are fixed, leading to less temptation to pull value out of the policy
- Riders that still allow for use of benefit money while still alive in certain situations
These policies give the greatest amount of stability out of the permanent life insurance types.
Guaranteed Universal Life Insurance Riders
You may also see certain riders that are common with guaranteed universal life insurance. Some of the common ones include:
- Accelerated Death Benefit Long-Term Care Rider: A cash indemnity payout that helps with care payments, even informal care while staying in your home. Learn more about living benefits of life insurance.
- Accelerated Death Benefit for Terminal Illness Rider: Access to a portion of your death benefit if you have a terminal illness
- Accidental Death Benefit Rider: Your beneficiaries get more money in addition to your death benefit if the death was an accident. Learn more about accidental death life insurance.
- Children’s Term Insurance Rider: You get a life insurance benefit if your child passes away
- Long-Term Care Rider: Your death benefit can pay for long-term care
- Waiver of Monthly Deductions Rider: Pays for all monthly deductions if you’re disabled, a waiting period may apply
Riders can vary by which company you are going through and some may be available in different states. It’s important to discuss the option of riders with an insurance agent.
Pros and Cons of Guaranteed Universal Life Insurance
To help you decide if this policy is right for you, below we’ve outlined the pros and cons in an easy-to-understand manner.
- Guaranteed universal life insurance is great for people who want to maximize their coverage amount only.
- These policies are good for people who want more simplicity in their plan. You basically pay your premiums and let it ride.
- The fixed, guaranteed death benefit allows for peace of mind.
- Some plans allow for a buy-sell agreement that can help protect your business.
- You can still access cash from the policy while living, often through riders.
- You don’t have the option of cash value growth: what you pay into the plan and the benefit you receive is it.
- There is no cash value account in this policy. If you expect to have access to cash value to supplement your retirement income, this is not for you.
- If you like the idea of flexible premiums and benefits, this plan may not be a strong choice.
Whom is It For?
Guaranteed universal life insurance tends to be for people who prefer ultimate stability and they don’t plan to take cash from while still alive. A guaranteed universal life insurance policy is best if you like the stability of knowing that the plan has a guaranteed death benefit in place.
How Much Does Guaranteed Universal Life Insurance Cost?
We get an illustration of a policy for a man who started the policy at 45 years old. His initial death benefit is $150,000 and his initial monthly premium is $115.52. Compared to indexed universal life insurance and whole life insurance, which can provide similar coverage benefits, the premium for guaranteed life insurance is significantly cheaper.
However, his death benefit stays at $150,000 throughout the policy and his premium stays at $1,386.24 annually. The account value fluctuates slightly, going from $226 in the first year to $1,766 in the 12th year. Then it steadily drops to $0 in the 20th year and beyond. Surrender value sits at $0 for most years, which is the amount available if you let go of the policy.
You can see how the general purpose of these plans is to have a stable death benefit and premium with the lowest premium payments possible.
Yes. Guaranteed Universal Life Insurance (GUL) provides the same guaranteed and permanent coverage for less than half the cost of Whole Life Insurance premiums.
If you like the idea of one fixed death benefit for a set amount in premium payments, guaranteed universal life insurance is a solid policy type to look into. You can’t increase cash value through investments or market performance, and it’s harder to withdraw cash from the policy. However, if you plan to use a life insurance policy for the more traditional purpose of a fixed death benefit, this is a solid option.