Guaranteed Universal Life insurance (GUL) is a policy form that is evolutionary. In the world of permanent insurance products where coverage lasts until death, GUL is the newest version of protection.
But is it a good choice?
Unlike Term Life insurance where coverage lasts a specified number of years, permanent life insurance needs to be inforce, regardless of when! Historically, permanent life insurance policies were supported by the policy cash values. It was those cash values that were needed to keep coverage inforce. When those cash values in Whole Life or Universal Life were depleted, coverage lapsed.
GUL is a whole new ball game!
Guaranteed Universal Life is built on a required actuarially generated premium schedule to support the coverage being permanent. It can be a single premium or a schedule of premiums over time. In that GUL consumes all cash values over time, the required premium is the foundation. Missing a premium collapses the coverage! And Reinstating coverage is complicated.
Without any cash value in the contract, the GUL policy type is at a minimum an “unsecured promise” by the insurer supported only by the premium schedule. It sounds pretty straight forward – but is it? These policies need to last 20, 30, 40 years and more.
So, if you are considering a GUL, here is what you should consider:
1) Complete the premium requirement in as short of time frame as possible. Premiums for more than 10 years just leave too many opportunities to miss a premium (collapsing coverage).
2) Go BIG – make sure your insurance company of choice is large and highly rated.
3) Think mutual – in the world of insurers, you have mutual companies that are owned by the insureds’ and stock insurance companies that are owned by the stockholders’, not the insureds. Being in the second position on a large insurance policy is not a good thing.
If you have questions on GUL and its use by your client, whether under current consideration or in a policy review ask Steve at 203.698.9341 or email email@example.com.
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