The life insurance industry has evolved over the years. 40 years ago, consumers had limited options. It was either whole life or term insurance. Today, you can choose from many types of life insurance. There are numerous variations of term and permanent life insurance. In this article, you will learn some important aspects and recent changes to one type of permanent life insurance: Guaranteed Universal Life Insurance (GUL).
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When using our quote engine, select “Lifetime” for the GUL quotes. Keep in mind, you will see some top carriers for term and GUL, but we use three quote engines to include ALL the top carriers. To obtain a customized quote showing all the best carriers, please complete the quote request form or contact us directly. There is no single quoting tool that will show all the top carriers offering GUL.
A Brief History of Guaranteed Universal Life
The purpose of this article is to bring you up to date on GUL in 2018. We have written extensively about this product in other articles (see our GUL Review), but a quick synopsis will help provide some context for this update.
Also known as Term for Life or Term to 100, guaranteed universal life is a permanent life insurance policy that is not designed to build cash value. This product works well for people who like the idea of having some permanent life insurance, but don’t want to mix their investments with their insurance. There are no moving parts, just guarantees:
- Level Premium Guaranteed
- Guaranteed Face Amount
- Guaranteed Lifetime Death Benefit
This product has only been around for the past 15 to 20 years, but has grown in popularity. The traditional universal life products are designed to grow cash value. These products can serve a good purpose for some people, but many others don’t like the dependence on interest rates and economic conditions. GUL rates won’t increase based on interest rates. For more information, see our GUL Pros and Cons.
GUL is not a trendy product. Unlike Return of Premium Term or Mortgage Protection Insurance, GUL is rather simple and straight forward, thus it is referred to as Term for Life. We know it’s not trendy (and gimmicky) because you won’t find marketers recruiting agents to sell GUL. Whenever there is a new, “hot” product, the marketers engage in heavy recruiting and promotion. We’ve seen many of these products come and go over the years. Not the case with GUL.
So, what’s new with GUL?
Increase in Policy Features and Riders
Although GUL is simple and very easy to understand, many companies have added riders to their products. For example, many carriers offer chronic illness, accelerated death benefit, and long-term care riders. These “living benefits” are quite attractive and can tip the scale when two or three carriers are very close in premium and financial ratings. These riders are not the most important factor, but can add significant value to the policy.
Some Carriers Exiting the GUL Space
Several carriers have already pulled out of the GUL market due to the low interest rate environment. Since GUL policies are fully guaranteed, they require more stringent reserve requirements. The reserve requirement for guaranteed universal life products is typically 4 or 5 times more than non-guaranteed products. Non-guaranteed products are often based on interest rates, the S&P 500 or another index.
Due to the higher reserve requirements, some companies are not willing to stay in the GUL market. We have already seen a few carriers drop GUL from their product line or increase rates. The more stable, conservative carriers with very strong financial ratings will be affected, but not to the extent of other, weaker carriers.
Focus on Internal Rate of Return / Comparing GUL to Other Investments
As previously stated, guaranteed universal life insurance is not designed to build cash value. If you’re looking to invest money inside a life insurance product for favorable tax treatment, then there are other products to consider, i.e., indexed universal life, whole life, etc. However, all permanent life insurance products are an investment by their very nature.
Life insurance is a way to invest in the financial well-being of your loved ones. The best way to compare life insurance to other investments is to look at the internal rate of return. The internal rate of return (IRR) shows what you would need to earn (in savings or investments) to mirror what your beneficiaries would receive from the life insurance policy.
For example, we recently ran an IRR illustration for a healthy 75 year-old male. Based on the IRR, if he died at age 87, the IRR is over 10%. That is a very high number. The IRR decreases the longer you live since you are paying more premiums. Checking out the IRR can be very helpful. Most people don’t think of Guaranteed Universal Life insurance as an investment, but that’s essentially what it is.
- Tax Free Death Benefits (Not So New)
One of the nice benefits of life insurance is that the death benefit is not taxable. This shouldn’t fall under the “What’s New” heading, but it important to note when talking about life insurance as an investment. Unlike other investments that could be hit with a 30%, 40% or higher tax rate, life insurance proceeds are tax-free. This makes it an easy and hassle-free way to to leave money to your beneficiaries.
Guaranteed Universal Life 2018 Updates Conclusion
Hopefully, this article has helped you better understand GUL and some of the more recent trends with this product. If you’re reading this article in 2019 or later, then do a search for GUL and the current year or “updates” in our search bar.
We are experts in GUL and stay informed regarding all the best carriers and products on the market. Rates are continually changing, so it’s best to request current rates. Rates change fairly often. Also, carriers add (or remove) product features and riders.
We will be glad to run comparison quotes for you. Some of the top carriers don’t share their GUL rates with any quoting service. For that reason, we go directly to the carriers’ illustration software. Our quote engine is one of the very best and can give you a good idea of rates. However, for best results, please request a customized comparison quote. We can help you steer clear of inferior carriers and zero-in on the best companies. Call us for advice, we will be glad to help you.