Like all types of life insurance, there are several advantages and disadvantages. Today we’re going to explore Guaranteed Universal Life Insurance pros and cons in depth.
Quick Tip: For a quick comparison quote of the best carriers offering Guaranteed Universal Life, please use the instant life insurance quote box to your left. Select “lifetime” in the drop down box under type of life insurance.
In a recent article, we provide a review (or overview) of guaranteed universal life insurance (GUL). This product has filled a need for people who want permanent life insurance, but they don’t want to mix their investments with their insurance.
Exploring Guaranteed Universal Life Insurance Pros And Cons
Pros of Guaranteed Universal Life Insurance
- No market risk. Even if interest rates are at all time lows, the policy will still perform the same.
- The death benefit is guaranteed to stay level.
- Guaranteed level premiums.
- No “moving parts” – a very simple policy design.
- Not expensive compared to Whole Life insurance.
- Flexibility to select the age guarantee – from age 90 to 121. The longer the guarantee age, the higher the premium.
- Easy to make comparisons with the best GUL carriers
- Makes a nice supplement to term life, so some insurance stays in force permanently.
Cons of Guaranteed Universal Life Insurance
- More expensive than 30-year term life insurance and some other Universal Life products (that don’t have the same type of guarantees).
- Doesn’t provide the flexibility to skip premium payments like standard universal life. Missed premium payments can shorten or eliminate the guarantee.
- Limited or no cash value accumulation. Doesn’t have the upside potential of other universal life products.
Guaranteed universal life policies are geared towards people who are willing to commit to ongoing premium payments. It is important to have the financial capacity to pay the premiums, so someone just starting out in an unstable industry or career might not be the best candidate for GUL.
The return on this investment (in terms of commitment) is the peace of mind that comes with a guaranteed, tax-free death benefit to their loved ones.
The No-Lapse Universal Life Insurance
As described in the article reviewing GUL, this product is sometimes called No-lapse Universal Life or Term to Age 100. These alternate names underscore the main benefit of this product. Some people have no desire to put their life insurance at risk because of the potential to accumulate cash value.
Even for people with a high risk tolerance for investing, GUL can provide assurance that if retirement savings are not sufficient, at least there is life insurance available for your dependents or beneficiaries.
Some people are risk takers when it comes to their sport of choice (surfing, skydiving, etc.), but when it comes to commuting, they want the safest vehicle possible. In a similar way, you might have a higher tolerance for market risk now, but want the assurance that your life insurance will never lapse due to unforeseen market conditions.
The Risk of Outliving Your Term Life Insurance
Of course, everyone hopes to outlive their term life policies. Term insurance is inexpensive because the probability of dying prior to the term period is very low.
Many term life policies are purchased to cover children while they are dependent on the primary breadwinner’s income. However, there are numerous situations where life insurance is needed even when children are grown and independent. For example, a spouse may be dependent on their wife’s or husband’s income well into their 50s or 60s.
Sometimes, people realize there is still a need for life insurance when their term insurance expires, whether that is at age 50, 55, 60 or older. That’s where a guaranteed universal life policy can provide the additional protection. The cost to replace a 20-year term policy that expires at age 55 would be very high, especially if any health conditions are present.
Having a portion of coverage as permanent insurance provides that added security. If retirement savings are not adequate or other financial setbacks occur, then a guaranteed universal life insurance policy would be a tremendous help.
Since every situation is different, we are here to help you weigh the pros and cons as they apply to you. We want to help you make the best decision based on your unique needs. Please call us for a free consultation at 678-236-1600.