Quick Article Guide
Many people find whole life insurance to be too expensive. And while term life insurance can indeed be the perfect solution, concern often arises:
“I like the price of term life insurance but am afraid of outliving it and being left without coverage later in life.”
This is a very common concern, as living past the end of your term would leave your family without protection
Luckily, there is a middle ground between whole life insurance and term life insurance. Guaranteed universal life insurance is an increasingly popular choice for those looking to secure affordable long-term coverage. Read on to learn how you can get the cost benefits of term life with the security of whole life.
Read on to learn how you can get the cost benefits of term life insurance with the security of whole life insurance.
If you are like many of our clients age 60 or older, you’ve had term life insurance in the past, and it has since expired, or your term policy is getting ready to expire. If this is the situation you are in, you’ve probably received a notice that your rates are about to skyrocket. Your next policy should be your last policy, as it becomes increasingly difficult to re-qualify as you age and your health is not guaranteed to remain insurable. Read more about life insurance after 60, how to save on rates, and how to protect your family here.
Despite the implication of its name, guaranteed universal life insurance (GUL) is not whole life insurance. But, it is designed to last your entire life. It does not build cash value, allowing you to keep your monthly payments low, and does not carry the expensive management fees of whole life.
Instead, a GUL policy offers fixed premium rates through the life of the policy, just like a term policy. While term policies offer fixed rates for a specific number of years (10, 15, 20, 25, 30), GUL policies are set to specific ages (90, 95, 100, 105, 110, and even 121). The later the age, the higher the likelihood of your policy paying out a death benefit, and the higher the cost. With this in mind, you have the option of tailoring your GUL policy to your needs, life expectancy, and budget. In many cases, especially after the age of 60, guaranteed universal life can be even more affordable than a comparable term life policy.
We’re always skeptical of any non-guaranteed universal life policy that involves a savings or investment option, given the market risk and the fact that your cash accumulation is not a death benefit but a living benefit. Most of the clients we talk to are unaware of the fact that the “cash” in their “cash accumulating” policy is never really their money. Consider the fine print:
- If you withdraw the cash from your “cash accumulating policy”, the insurance company views this as a loan, and the death benefit from your policy will be reduced until the loan is paid back (with interest). If you fail to pay back this loan, you can lose your coverage.
- If you pass away before you withdraw the “cash value” from your life insurance policy, the insurance company gets to keep your cash.
- If you withdraw the cash from your “cash accumulating” policy, you must pay a hefty fee similar to a loan origination fee. Some life insurance companies charge more than $500 for this service.
Here’s why we’re big proponents of guaranteed universal life over non-guaranteed universal life:
- Your cost of insurance will not change, even as you get older or if your health changes.
- Your coverage isn’t tied to an investment. You pay for the life insurance protection only, just like term life insurance.
- You aren’t pouring extra money into your policy. Trust the financial experts on this–you’re better off putting your money into a savings, or perhaps paying down your mortgage.
- You will pay less up front. Guaranteed universal life insurance is a fraction of the cost of non-guaranteed universal life.
- You don’t run the risk of losing coverage from unfavorable investments or changes in the market.
In 2015, we worked with a 66-year-old male, in excellent health, named Frank. Frank was shopping for a $500,000 dollar policy to leave money behind for his daughters, and he needed the coverage to last for his entire life to ensure that they received the money he intended to leave behind for them. For his non-guaranteed universal life insurance policy, he was quoted at a planned annual rate of $12,000 dollars. However, for his policy to last his entire life, he would need to earn more than 5% on the money he invested. If the market did not perform well in the coming years, the cost of this policy would dramatically increase.
The males in Frank’s family typically live until their late 80s and with Frank’s current health standing, he plans to live until at least the age of 90. We decided to compare Frank’s options for a guaranteed universal life policy until age 95. With this policy, there are no surprises. Frank’s rate of $9,350 per year will not increase, even if the market flops. The dollar amount may not seem like a huge difference, but let’s see what happens if Frank lives until age 90.
Common Uses for Guaranteed Universal Life Insurance GUL policies are ideal for the following purposes:
- Pension maximization
- Estate planning
- Leaving an inheritance
Talk to an Expert
There’s no cost to apply for guaranteed universal life insurance. You only pay for the coverage itself once you’re approved and have accepted the policy. If you think guaranteed universal life insurance might be right for you, contact JRC Insurance Group for a free quote and consultation. We are licensed in 48 states, including pre-qualification medical underwriting, so you can know your cost of life insurance before ever applying.
Latest posts by Cliff Pendell (see all)
- The Best No Exam Life Insurance Companies in 2018 - February 26, 2018
- 10 Tips to Save Money On Life Insurance (Updated for 2018) - January 29, 2018
- Recent Changes to Estate Tax Law (What’s New for 2018) - January 22, 2018