This
post in one in a series on Guaranteed Universal Life plans offered by the best carriers. I have already covered some of the basics regarding Guaranteed Universal Life here (a review of GUL) and here (the pros and cons of GUL).
I think a discussion of Guaranteed Universal Life insurance should be a part of any conversation on term life insurance.
As we like to call it, “term for life” or “term to age 100”, GUL is a product that is quite a bit different than other types of permanent life insurance. Not everyone wants or needs GUL, but it is certainly worth considering — even as just a small percentage of the total amount of coverage.
Most people only think of permanent insurance as Whole Life or other types of Universal Life insurance that have a cash value component. While those products have their place, what makes GUL different and much simpler to understand, is that it’s not designed to build cash value, but simply provide permanent life insurance protection — term insurance that is guaranteed not to lapse.
Overview of North American Life
In this article, I will take a look at another one of the leading Guaranteed Universal Life insurance companies: North American. North American Life Insurance Company for Life and Health is sometimes referred to as NALIC or just North American.
NALIC was founded in 1886; they are a company with a long, stable history in the life insurance business. They are a member of the Sammons Financial Group (SFG). SFG is not publicly traded, which means they are not subject earnings pressures typically faced by carriers that are publicly traded.
With more than $16 billion in assets and $105.4 billion life insurance in force, North American is one of the largest carriers offering GUL.
Financial Ratings and Information:
- Rated A+ by AM Best (Superior)
- Rated A+ by Standard & Poor’s (Strong)
- Ranked 93 by Comdex. This rating shows their overall financial ratings compared to all other carriers.
- 93.5% of their bond investments are considered investment grade and have a rating of “Excellent” by the NAIC (National Association of Insurance Commissioners) Quality Rating
North American Guaranteed Universal Life Review – What Makes Their Product Different.
North American’s GUL product is named Custom Guarantee.
- Very competitive rates. North American is typically among the lowest three carriers, depending on age and health.
- Chronic Illness Benefit. This policy provision is not a rider (at extra cost) and is very strong compared to other carriers. The specifics of this provision (received from my North American contact) are below. It is important to understand the value of this benefit.The insured is considered chronically ill if a physician has certified that within the past 12 months the insured:
- Is permanently unable to perform, for at least 90 consecutive days, without substantial assistance from another person, at least two Activities of Daily Living (bathing, continence, dressing, eating, toileting and transferring). OR
- Requires substantial supervision by another person to protect oneself from threats to health and safety due to Severe Cognitive Impairment.
One election is available every 12 months. The maximum death benefit amount that may be accelerated per election is the lesser of 24% of the death benefit or $240,000.
- Fairly Lenient Underwriting Our experience has been very good with North American. They have good medical underwriters who are willing to consider unique circumstances.
North American’s Riders.
As mentioned above, North American’s Chronic Illness benefit is not a rider, but a policy provision that is included at no extra cost. Their riders are as follows.
- Accidental Death Benefit
- Children’s Term Insurance
- Guaranteed Insurability Rider – This rider allows you to purchase additional life insurance without evidence of insurability at certain points (Option Dates) during the life of the policy. This rider is only available for people up to the age of 40 at policy issue.
- Waiver of Monthly Deductions – This rider will allow waive the monthly premiums in the event of a disability lasting at least six months. Not available in California.
When a Guaranteed Universal Life Policy Makes Sense
Ideally, people will buy term life insurance early in life and by the time their policy expires, they will have no or little debt. Also, they will have saved a sufficient amount, so if they were to die, their loved ones would not suffer a significant financial setback. That’s the rationale behind “buy term and invest the rest”.
The “buy term and invest the rest” works well in many situations. However, we have learned through experience and education, that a large percentage of people still have a significant need for some life insurance beyond what they originally anticipated and for which they planned. See the example below.
Scenario where a North American GUL works well
Let’s take a 52 year-old male we’ll call Charles. Charles, who is married and the primary breadwinner, purchased a $1,000,000 20-year term policy when he was 32 and his youngest child was just born. Now, he is age 51 and is nearing the end of his term policy, but realizes he still wants (and needs) life insurance.
Charles’ youngest child just entered college and his older child will soon enter graduate school. Also, his retirement savings isn’t what he hoped it would be, so if he were to die, his wife would be in a tough financial position. Charles’ wife (who is 5 years younger) has some serious health issues, so that has been an emotional and financial burden for them.
Charles looks at some options for term life insurance at different term lengths: 15, 20 and 30 year policies for $250,000. Since Charles is in good health and doesn’t smoke, he should qualify for the Preferred non-tobacco rate with most carriers.
So, when running quotes, this is what Charles finds:
15-year term = $599/year
20-year term = $748/year
30-year term = $1395/year
Lifetime (or to age 100) term: $2782/year
Charles doesn’t want to pay into a 30-year term and then, if he were to die at age 83 or older, there would be no coverage after paying $41,850 in premium. If Charles dies at age 84, then he would provide a tax-free life insurance benefit (via the Guaranteed Universal Life policy) of $250,000 to his beneficiaries.
He would have paid $87,900 in premium with the GUL, but he could rest assured in his later years that he would provide his loved ones with a $250,000 benefit. Purchasing a term policy could also work well, it just depends on Charles’ overall financial situation and the desires of he and his wife.
Another option would be for Charles to purchase a 15-year term policy for $150,000 and a Guaranteed Universal Life policy for $100,000. It’s not necessarily either/or, but possibly both.
We are here to help you.
As you can see from the example above, everyone has unique needs and circumstances. We will be glad to talk to you about your situation and help you determine if term life insurance and/or Guaranteed Universal Life insurance would make sense for you. 678-236-1600
