If you’re having a hard time deciding between term life insurance and whole life insurance, there is another alternative called “Guaranteed Universal Life Insurance” that’s become extremely popular these days.
The name might lead you to believe that it’s just another form of permanent insurance such as universal life, but it’s actually quite unique in its own right and stands apart for a variety of reasons.
This product is very suitable for a variety of individuals, for a number of scenarios.
We’ll give you all the pros and cons of this type of life insurance, so you can decide whether it is right for your particular situation.
Quick Guide to Guaranteed Universal Life Insurance (GUL)
- What is Guaranteed Universal Life Insurance
- Reasons to Purchase It
- Pros of GUL
- Cons of GUL
- How Do You Apply?
Guaranteed Universal Life Insurance also goes by a number of acronyms and titles and is known in the industry as a “GUL” policy, “No Lapse” or “Secondary Guarantee Universal Life.”
The first thing you should know is that a GUL policy is really a hybrid type of life insurance that contains elements of both Term insurance and Permanent insurance. It gives you the best of both worlds.
It allows more flexible coverage length than a term policy because it is age specific as opposed to term specific. Term policies cover you for shorter periods and typically the longest they will go is into your 80’s.
With a GUL policy you may choose the age you need or want coverage to continue until. This eliminates the need for reapplying when a term ends. You never have to worry about deterioration of your health or having to take another medical exam to extend coverage.
Some of the age choices you may select for a policy are: 90, 95, 100 and up to age 121!
In that sense, some people use GUL as a sort of final expense life insurance.
Another aspect of GUL is that, unlike a universal or whole life permanent policies, the focus is mainly on the death benefits, not the cash value component.
Guaranteed Universal life insurance policies may also be “customized” for the individual policyholder. For Example you may opt to pay more for higher cash value. Some GUL policies also offer a variety of premium options.
The biggest advantage of a guaranteed universal life policy is that is much simpler in its product design and easier to understand than many other types of permanent policies. It’s also “much more affordable” than other standard permanent policies.
Before deciding if this type of policy is right for you, we would first mention that not all GUL policies are the same. Some are more restrictive than others in regard to what they offer.
The best way to pinpoint the most suitable Guaranteed Universal Life insurance policy is to use an independent agent. At Huntley Wealth, we have access to over 40 different companies, so we can comparison shop for you and advise which carrier would be best for your unique situation.
Many individuals who buy life insurance need coverage well beyond certain age limitations, and are risk averse.
Universal life insurance offers all-round protection to your loved ones, thanks to its security, flexibility and variety of investment options. In times of low liquidity, you can alter your premium payments or may even withdraw from your cash value fund. In addition, you can increase or decrease the face value of your insurance as per your circumstances. Investopedia, Permanent Life Policies: Whole Vs. Universal by Dave Pooja
Here are additional benefits that GUL offers that may be advantageous to policyholders:
• Allows policyholder to lock in a guaranteed death benefit for specific time required for coverage
• Provides a guaranteed tax free death benefit for beneficiaries
• Provides a vehicle to pass along wealth to children or grandchildren
• May be used to cover estate taxes, fees and outstanding medical bills
• May be set up as a charitable trust
• May be used for cash value accumulation
• Ideal for a Buy/Sell Agreement
• Provides a policy which is both flexible and affordable
Life Insurance Tip
Although a GUL policy is more expensive than a Term policy, it is cheaper than other types of Permanent policies. Another approach is staggering or layering your life insurance needs by purchasing an additional term policy to cover your short term life insurance needs.
You can see sample term life insurance quotes here.
Instead of buying a single, more expensive GUL policy which includes your short term needs, choose a GUL policy with more appropriate death benefits for the long term and a term policy to cover short term needs. You can cancel the term policy when it’s no longer necessary and save money in the process.
Let’s look at the pros of these types of policies to better understand the advantages:
• Level premiums and death benefits which are guaranteed as long as the premiums are paid on time.
• Length of premiums and coverage can be structured to your needs
• Policies are available which offer flexible premium options dependent on your individual financial situation.
• Very affordable rates for males age 75 and older.
• A very basic product which is easy to understand
• Premiums are much cheaper and more affordable than other types of permanent life insurance products
• The volatility of market interest rates does not affect premiums
• Easy to make product comparisons from insurer to insurer
• Allows you to transfer cash surrender values of other permanent products to a GUL policy without taxation by using a Section 1035 Exchange.
Please note when we say “Level premiums” that we are talking about universal life with a “no lapse rider” or some sort of coverage protection guarantee. Traditional universal life insurance has flexible premiums, and can even be used as an investment. If you’re going to go that route, I suggest looking into indexed universal life.
As with any policy, there are some negative issues in connection with this GUL policies:
• Costs more than Term life insurance
• Many policies do not have any cash value
• Premium payments MUST be made in a timely fashion to maintain the guaranteed level premium feature
• Some policies include “surrender” charges or fees if policy is cancelled before the expiration date
• Some policies offer investment options which you may prefer to avoid as they entail management fees and may be more expensive
Last, I have yet to find a no exam life insurance version of guaranteed UL.
The process is the same as any other standard life insurance policy. You will have to complete an application form and undergo a medical examination which we will arrange for you. All you have to do is choose your options or even better – contact one of our independent agents here at Huntley Wealth to discuss your particular situation.
We will help you find, not only the best coverage for your needs, but also the most affordable carrier for your particular age and health circumstances.
Have more questions about finding low cost Guaranteed Universal life insurance? Call us today at 888-603-2876 we can help!
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