Guaranteed Universal Life Insurance – Flexible Design

This article is one of many articles we have written on guaranteed universal life insurance.  Also known as “term for life”, this unique life insurance product looks a lot like “term to 100” since it’s fully guaranteed and, for the most part, isn’t designed as a cash-value product.  However, there are some GUL products that allow you to access the death benefit as tax-free income after a period of time.  Also, the death benefit can be used to pay for long term care expenses.

Most of our clients prefer to keep their life insurance and their retirement accounts separate.  Guaranteed universal life is a great product for those clients who like term insurance, but also want some of their term insurance to last beyond the standard term periods.  Perhaps they don’t like the idea of dropping from $1 million of term coverage to zero – overnight.   They err on the side of caution and want some permanent insurance to leave for their loved ones.

To read an article that examines the pros and cons of guaranteed universal life insurance, please click on this link.

The GUL policy described below is unique since it is designed to provide the following:

• Permanent Life Insurance to age 100 (with guaranteed level premiums)
• Chronic Illness Coverage – used to pay for long-term care expenses
• Supplemental “Retirement Benefit”

Life Insurance, Chronic Illness Coverage & Access to the Death Benefit (in the form of an income stream) – All in One Policy

Let’s take a look at a real-life example.  Before looking at the specific numbers, check out the “highlights” to this type of guaranteed universal life policy:

1. Pay premiums for limited number of years (10 years in our example)
2. Do nothing for a period of time – no premium payments (also 10 years in our example)
3. Receive your entire original premium back over the next 10 year period as a supplemental retirement benefit – Fully Guaranteed
4. Have a death benefit remaining that will be paid out at death or can be used to pay for long term care type expenses at $8,400 a month

Here is a solution for Scott:

1. A $1,000,000 GUL into which Scott will pay $24,000 a year for 10 years. He likes the option of a “limited-pay” policy, rather than paying premiums for life.
2. Scott pays nothing for the following 10 years – at which point he is now age 70
3. He then begins taking out $24,000 a year for the next 10 years tax-free. This option is based on a rider that allows access to the death benefit.
4. Withdrawal of $24,000 a year gradually reduces the death benefit to $420,000
5. The remaining $420,000 of death benefit remains in force until he reaches age 100
6. The remaining death benefit is also available as a chronic illness benefit at the rate of 2% or $8,400 a month should that need arise

• Permanent life insurance coverage –  a significant portion of which will last to age 100
• Premiums are payable for only 10 years
• After 10 years of contributing zero, the client receives all his earlier premiums back tax-free
• The remaining death benefit can be drawn down to pay for LTC related expenses should that need arise.

Chronic Illness / Long-term Care (LTC)  Benefit

The last point is quite strong.  Many guaranteed universal life policies have some sort of chronic illness coverage.  This benefit is oftentimes available as a rider (with additional cost). Some carriers provide this benefit as “built-in” policy provision at no additional cost.

You may have decided to forgo long-term care insurance for various reasons.  Some people don’t like the idea that long-term care insurance premiums are not guaranteed.  In other words, your premium could increase in the future.  Not too many people on a fixed income would welcome a premium increase in their 70s or 80s.

Most carriers offering long-term care insurance have experienced rate increases for their active policyholders.   Since this product is relatively new, actuaries didn’t have sufficient date to price policies correctly.  The claims ratios were higher than anticipated, so they increased premiums to compensate.  A GUL with a strong chronic illness benefit guarantees no unexpected rate increases.

Guaranteed Universal Life Insurance – Flexible Design

The main point of this article is to show you how flexible you can make a GUL.  You might want a simple, straight-forward policy that is guaranteed to age 100 or 120.  However, it’s important to know that many carriers offer a chronic illness benefit and a return of premium benefit at no additional cost.  When comparing plans, it’s very important to consider the built-in and optional benefits.

The example provided above may give you some ideas on how a policy can be designed.  Every carrier is different, so just because a carrier has a chronic illness benefit  or a return of premium benefit, the details can vary greatly.

Getting Guaranteed Universal Life Quotes

You can get a quick comparison quote on our website by selecting the “lifetime” option in the dropdown menu.  This quote engine shows several leading carries.  However, not all carriers are shown on our (or any) quote engine.  It’s a good starting point, so you compare GUL to other term plans.

We use three quote engines that allow us to compare ALL the top carriers offering GUL and term insurance.  You can select the guarantee age, whether it’s to age 90 or 121 (or we can run several quotes). We can provide a customized quote so you can see all the important policy provisions and optional riders.

Not only do we shop the market, but we are experts at guaranteed universal life.  We stay current on all the carriers and various product offerings.  Like the example in this article, we can suggest policy designs that you might not have considered.

For a free customized quote and/or consultation, please call us today.