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Guaranteed universal life insurance, also commonly known as a “GUL” policy, is sort of a “hybrid” between term and whole life insurance. GULs offer the permanence of whole life insurance and the affordability of term life insurance, with level rates and premiums until age 90 or later.

What is a Guaranteed Universal Life (GUL) Insurance Policy?

Guaranteed universal life insurance, also commonly known as a “GUL” policy, is sort of a “hybrid” between term and whole life insurance. GULs offer the permanence of whole life insurance and the affordability of term life insurance, with level rates and premiums until age 90 or later. In addition, these policies do not require an investment value, and there are no investment risks. With a GUL policy, your monthly rates and coverage can be guaranteed until the age of your choice, even to age 121!

How does a GUL insurance policy work?

A guaranteed universal life (GUL) insurance policy offers a death benefit and premium payments that will not change over time. You select an age at which the policy ends (such as age 90, 95, 100, 105, 110, or 121). Choosing a higher age will increase the premium. Guaranteed universal life insurance generally has little or no cash value and is typically the cheapest universal life insurance you can buy. You’re paying for the lifelong coverage, similar to a whole life policy. GUL is sometimes called “no-lapse guarantee universal life insurance.” This addresses recent problems in which traditional, non-guaranteed universal life insurance policies lapsed because the cash value couldn’t cover the policy’s expenses and the cost of insurance. As a result, some policyholders who wanted to keep their insurance in force had to suddenly pay much larger premiums than they had ever expected.

What you should know about GUL Insurance Policies.

1. Coverage is essentially lifelong
Like term life, guaranteed universal life lasts for a set period. But instead of choosing a term length, you choose the age the coverage will end, typically between 90 and 121 years old. Because it is relatively rare to live to the upper end of this age range, guaranteed universal life is essentially considered lifelong coverage.

In some cases, you can choose a younger expiration age, such as 70. The younger the age, the cheaper the premiums because you are more likely to outlive the policy.

You may be able to extend the coverage if you reach the expiration age, but the new premiums could be significantly more expensive.

2. Cash value growth is minimal
Cash value accounts are an investment feature of permanent policies like whole life insurance, which funnel part of the premium into an account that grows over time. While guaranteed universal life policies technically have a cash-value account, it doesn’t accumulate enough growth to rival permanent coverage.

If you are looking for coverage with significant investment opportunities, you may consider cash value life insurance policies that focus on growth.

3. Premiums are cheaper than whole life
Guaranteed universal life insurance is less expensive than permanent coverage such as whole life because it does not prioritize cash value growth. This may appeal to applicants looking for simple, lifelong, low-cost coverage. In addition, if you are older and aren’t interested in building up an investment, guaranteed universal life provides a way of getting coverage for the rest of your life, says Ken Toffolo, research council fellow at Aite-Novarica Group.

Compared with regular universal life insurance, guaranteed universal life premiums for older applicants are similar. But the cash value account in a universal life policy is more involved, and handling the ups and downs of an investment may not be something you want to take on.

4. Coverage can be a good fit for seniors
Life insurance rates are generally based on age and health, which means affordable life insurance for seniors can be hard to find. Term life is the cheapest option, but it is often unavailable to applicants in their 80s. And whole life policies can get very expensive later in life.

This is where guaranteed universal life policies can help fill the gap. It tilts toward term rates when term life is no longer available, Toffolo says, and it is less expensive than a whole life policy at an older age. Plus, issue ages for guaranteed universal life policies can reach the 80s, making coverage available to older applicants.

A $100,000 guaranteed universal life policy for an 85-year-old woman costs $1,134 a month, according to 2022 data from Quotacy, an insurance brokerage. A whole life policy for the same applicant is $1,420 a month, about 25% higher.

5. Death benefits and premiums are flexible
Guaranteed universal life insurance offers a little bit of flexibility, which is probably what makes it appealing, says Scott Holeman, director of media relations at the Insurance Information Institute, a trade group.

Similar to other types of universal life, guaranteed universal life offers the ability to adjust the coverage amount, policy length, or frequency of payments as your needs change.

Some policies also come with a return-of-premium rider. Life insurance riders are features you can add to a policy to customize coverage. A return-of-premium rider refunds all or some of the premiums you have paid if you cancel the policy, typically within a specific time window.

Already have Guaranteed Universal Life Insurance? Switching is easy

It might be time to switch insurers whenever the service that your existing insurer provides doesn’t meet your needs. For example, if you have a poor claims experience or an unexplained rate increase, it might be time to consider other options

If you cancel a previous policy before a new policy is effective, you could run into some serious financial problems.

Contact us today to help you with multiple options to choose from.
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