How Does Guaranteed Universal Life Insurance Work?

Universal life insurance companies offer a multitude of different plan designs which can make understanding the policy confusing at times.

So, when weighing out the guaranteed universal life pros and cons, it is important to understand each of the two different designs.

Which of these is an element of universal life insurance (GUL insurance)?

Builds a lot of cash value like whole life

Does not build any cash values and functions more like term insurance

If you answered both you are correct!

The cash values within a guaranteed universal life plans can be designed in many ways to suite your specific needs.

We make it easier to see your policy in action using our universal life insurance calculator to structure a plan that either build cash value or have literally no cash accumulation.

over funded Premiums for Cash Value Accumulation

Guaranteed universal life insurance policies can be designed to accumulate excess cash values inside the policy. For people with extra money, over-funding the cash account gives people flexibility and freedom in the future.

What type of interest rate is guaranteed in universal life policies?

Most polices currently offer a guaranteed interest rate of between 2- 3%. This is the minimum interest rate for your policy (worst case scenario).

Polices also offer a current interest rate which is often a much higher crediting rate.

So, if the investment options are successful, the cash value of the policy builds up faster than projected.

This can allow a policyholder to skip a premium payment, pay less than the scheduled premium, or have the policy paid-up at a certain age.

If you have accumulated substantial cash surrender values you can also elect to withdrawal or borrow against the policy.

But if the investment options are not successful, it’s possible to lose some of the cash value within a universal life policy. If the policy has not met the projected interest rates, the policyholder can always increase the premium so that the policy can continue to build cash value.

Keep in mind, that modern GUL life insurance is considered no lapse guarantee universal life.

What is the the no lapse life insurance definition?

When a policy has a no lapse guarantee, the premiums can not be changed by the insurance company during the life of your contract.

Even if poor investments have taken virtually all of the policy’s cash value, the death benefit remains in force as long as the policy premiums are paid.

Lower Premiums with No Cash Values

Policyholders who are not interested in accumulating money or who are apprehensive of fluctuating cash values have a another option.

This is a “hybrid life design” of guaranteed universal life insurance which combines elements of both term life coverage and universal life.

Like term insurance, these lifetime plans do not accumulate cash value, but the premiums also have no lapse guarantee rider to maintain life insurance up to age 100.

So, guaranteed no lapse universal life premiums can be scaled to coordinate with your desired budget and the death benefit required for your family.

As long as you continue to pay the no-lapse guarantee premium your coverage will remain in force.