At a glance:
Guaranteed Universal Life insurance (GUL) is a life insurance policy that offers low premiums and can cover you for your entire lifetime. Many people see GUL as taking a best of both worlds approach combining the affordability of Term Life insurance with the longevity of Whole Life insurance.
In This Article:
What is Guaranteed Universal Life Insurance?<
> As we mentioned at the top, a GUL policy typically lasts your entire lifetime and is the most affordable long-lasting life insurance policy offered by insurers today. A GUL policy offers a substantial death benefit, an age cap as to how long it will cover you, and may also allow you to recoup your premiums later on in the policy. Let’s break it down.
A death benefit is a sum of money that is paid out by the insurer to your heirs or beneficiaries when you pass away while your GUL policy is still active. This can be as little as $50,000 dollars or into the millions of dollars. The amount of the death benefit is one of determining factors in the cost of your monthly premiums. The death benefit of a GUL policy is guaranteed. This means that as long as your policy is in force (i.e. as long as you are paying your monthly premiums), your death benefit will remain in place. Other types of policies, such as Whole Life allow you to borrow from a cash value account in the form of a loan. On such a policy, your part of your death benefit may be used to pay back that loan. This does not apply to a GUL.
When you purchase a Guaranteed Universal Life policy, you determine the age that the policy will cover you through. These options can be anywhere between 90 years old to 121 years old. A GUL that covers you until 90 years old is going to be less expensive than one that covers you to 100, 110, or 121 years old. This is because the risk that you will outlive your coverage (meaning you live longer than 90 years) is higher for you which in turn means there is less risk that the insurer will have to pay the death benefit. However, compared to Term Life policies, which typically range anywhere from 5 years to 30 years, a GUL gives you the option to truly let your coverage live as long as you do.
Return of Premium
A GUL policy that also includes a “Return of Premium” means that after a certain period of years, you will be able to surrender your policy and recoup a percentage of the premiums you paid up until that point. This can be structured in many different ways depending on the insurer, and not all insurers offer this option. For example, you may have the option to surrender your policy after 20 or 25 years in return for 50% or 100% of your premiums. Again, these numbers will vary depending on the insurer you purchased your GUL from.
How much does Guaranteed Universal Life insurance Cost?
There are many factors that go into determining the cost of your monthly premiums. These factors apply to every type of life insurance product on the market today. Everything from age, biological gender, health, and amount of coverage will weigh into your monthly premium dollar amount. All of these variables help the insurer determine the level of risk that they are taking in insuring you.
Generally, you can expect age to be a dominant factor in the price of your premiums. By this, we mean the age at which you purchase the policy. The younger you are when you purchase a GUL, the lower your monthly premiums will be. A GUL has a guaranteed, set premium that will not change as you age. This is great news! It means that even if you fall ill, your rates will not increase. Therefore, purchasing life insurance while you are still young is advantageous to your monthly budget as you grow older.
Typically, a healthy 20 to 30-year-old can expect a GUL to cost between $45 and $55 dollars per month for $100,000 dollars worth of coverage. The beauty of a GUL is that it is one of the few policies that makes room for people who are older than 50. A 60, 65, and even 70-year-old can purchase a GUL policy. Granted, an average 70-year-old will be paying much more in monthly premiums for their policy (in the neighborhood of $250 dollars per month) but the fact that these policies are even available to them set these policies apart from Whole Life policies which typically don’t let you purchase after 50 or 60 years old.
How is Guaranteed Life Insurance Different From a Term Life Policy?
Here is a table to make sense of the key differences between Guaranteed Universal Life and Term Life insurance policies.
- Extremely affordable monthly premiums (starting in the $13 dollars/month range)
- Set Duration of anywhere between 5 and 30 years of coverage
- No option to receive a return of premiums
- No cash value or cash accumulation vehicle
Guaranteed Universal Life
- Affordable monthly premiums (starting in the $45 dollars/month range)
- Can provide coverage for your entire life
- May be able to return a portion of your premium payments after a set amount of years upon surrender of the policy
- Actually does have cash value, but the interest rates are so low, that it is not typically viewed as a benefit
Term Life insurance is popular because of its low premiums and simple setup. You can even complete the entire Term Life process online in many instances. A GUL shares some of the thriftiness of a Term Life policy where premiums are concerned, but will still cost a bit more. In return, however, you are getting a policy that will live with you and you will not need to worry about your coverage running out after a decade or two. Rates are most reasonable the younger you are with both Term and GUL policies.
Ultimately, the difference is a few more bucks a month for a lifetime of coverage.
Is Guaranteed Universal Life the same as Whole Life insurance?
The short answer is no. While GUL and Whole Life policies can provide life insurance coverage for the duration of your life, the overall philosophy behind both is quite different. Here’s a quick rundown of where these two types of insurance diverge from one another.
Guaranteed Universal Life
- Affordable monthly premiums
- Lifetime coverage
- Premium refund possibility
- May have a negligible cash value
- Pricey premiums and fees compared to GUL and Term (in the $90-$200 dollar range)
- Provides coverage for your entire life
- Has a cash value component that accumulates interest over time
- You can borrow against the cash value, but if you do not repay it before you die, the money will come out of the death benefit
There are many types of Whole Life policies that have different features surrounding the use and accumulation of the cash value component. The main thing to remember here is that a Whole Life policy is designed to act as both a life insurance policy that pays a death benefit as well as a means to provide a ‘living benefit’ in the form of a cash savings account that grows with the policy. Your access to this cash is not absolute and withdrawing from the cash value will incur certain fees or require that you pay back a loan against it. However, this aspect is the key difference between a Whole Life and GUL policy.
Who Should Get Guaranteed Universal Life Insurance?
Let’s start by saying that we believe everyone should have a life insurance policy of some kind or another. The difference that a death benefit can make in the lives of your loved ones cannot be understated. Life insurance is as much about easing burdens as it is about peace of mind. What we love about Guaranteed Universal Life Insurance is that it can easily fit inside many different budgets while providing you lifelong coverage.
So who is the best candidate for a GUL policy?
- If you want the stability of lifelong coverage with a substantial death benefit but do not want to spend $150 dollars a month on a policy, then a GUL is a great fit for you!
- If you would rather invest the money spent on more expensive Whole Life policies without sacrificing coverage, then a GUL is a great fit for you!
- If you are in your 20s, 30s, or 40s and want to get a jump on some fantastic, low premium rates, then a GUL is a great fit for you!
The rates for Guaranteed Universal Life are outstanding these days. It’s a wonderful time to take advantage of them. Let us know how we can help you! Our team has access to a broad line of GUL products. Our aim is to educate you and assist you in making a decision that best suits your needs. Reach out and ask us any questions you might have about which direction best fits your life goals.