Client Alert

Client Alert

Understanding the Hard Edge of Guaranteed Universal Life Insurance

In February 2020 I wrote a blog post regarding the use of Guaranteed Universal Life insurance. It’s clear that declining interest rates for a prolonged period of time have damaged the Universal Life policies, and the evolution of the damage was GUL – Guaranteed Universal Life.

Pretty simple

– you pay the scheduled premium, the insurer guarantees the death benefit

But what if you missed a premium, or were late?

We repeatedly asked for evidence of how the policy would change if and when a premium was missed or cancelled. We never received a good answer, until now.

In our first Case Study of GUL, we have a client with a $2m policy paying $35k per year issued in 2015 with guaranteed Death Benefit to age 100 with a scheduled annual premium. The client is chronically late but always pays.

With the last late payment we asked for a fresh inforce illustration , and found that the late payments backed the guarantee up and having the policy lapsing at age 87. The fix to get the Death benefit back to age 100 was an increase in the premium to $48,000, and on time. A 40% increase

It is interesting with the Covid-19 we are seeing insurer’s increase their GUL by up to 20%.

So to conclude, GUL is a product with a very hard edge. Pay your scheduled premiums in full, on time and you should be fine. If not??

It’s a good time with the changing world to request a life insurance inforce illustration to be certain your policy is performing as it should.

If you need assistance in auditing your clients Life policy drop me an email for help sshepard@shepardinsgrp.com or call me at 203 698-9341.