What Is Guaranteed Universal Life Insurance?

Guaranteed universal life insurance is a particular type of life insurance that offers a guarantee on the death benefit proceeds of the policy. A guaranteed universal life, called guaranteed UL, ensures that your death benefit will not terminate if there is insufficient cash value to support the death benefit. Because ordinary universal life insurance must have cash value to stay in force, the guaranteed UL allows policies that would otherwise lapse to remain in force so that the beneficiary receives the death benefit that they are entitled to.

Benefits

Guaranteed UL policies give you death benefits that you can depend on. Even if the cash value drops significantly, or there is no cash value remaining in the cash value account, the policy will remain in force. This is significant because, ordinarily, insurance costs are deducted from the cash value. If there is no cash value, the policy lapses.

Drawbacks

You must pay at least the target premium to keep the policy in force under the guarantees. The target premium is the minimum amount of premium required to keep the death benefit in force. With guaranteed ULs, this premium could be substantially more than the minimum premium allowed on the policy.

Considerations

Make sure you understand that guaranteed UL policies are not meant to build cash value. Guaranteed UL policies also have very specific terms that must be met in order for the guarantees to be valid. Generally, premiums must be paid on time and the target premium represents the new minimum premium for the guaranteed death

References

  • "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
  • "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004
  • LifeInsure: Universal Life Insurance with Guarantees

About the Author

I am a Registered Financial Consultant with 6 years experience in the financial services industry. I am trained in the financial planning process, with an emphasis in life insurance and annuity contracts. I have written for Demand Studios since 2009.