When shopping for life insurance, there are a lot of confusing terms that get thrown around, and it can be difficult to determine exactly which type of insurance is right for you. One of the terms that you might hear is guaranteed universal life insurance. In this article, we’ll clarify what guaranteed life insurance is and help you figure out if it’s the right solution for your needs.

What is guaranteed universal life insurance?

guaranteed universal life insuranceIn order to understand what guaranteed universal life insurance is and how it can benefit you, it’s helpful to first understand two other common types of life insurance: term life insurance and whole life insurance. Term life insurance covers you for a specified period of time, like 20 years or 40 years, and can accrue cash value during that time. You’ll need to renew it when you come to the end of the term. While this type of life insurance is affordable, you run the risk of losing the cash value of the policy you’ve accrued if you don’t pass away before the term is up.

Alternatively, whole life insurance covers you for your entire life, as the name suggests. A whole life insurance policy can build value over time and does not expire. However, this type of insurance can be very expensive.

Guaranteed universal life insurance is essentially intended to combat the problems that term life insurance and whole life insurance present. Guaranteed universal life insurance premiums are set to cash out at a certain age – well over 90, in many cases. Although it is not technically whole life insurance, it is unlikely to expire before you pass away. The longer your policy, the higher your premiums will be.

Guaranteed universal life insurance has fixed premiums and a fixed death benefit, and cannot accrue cash value over time. Because of this, companies are able to keep the premiums for these insurance policies relatively low. You can select the value of the death benefit that you would like to have, with higher benefits charging higher premiums.

Benefits of Guaranteed Universal Life Insurance

There are many benefits of a guaranteed life insurance policy, which is why it makes a great choice for virtually anyone. An increasing number of policy holders are seeing the benefits of guaranteed universal life insurance and are switching to these types of policies to save money. Here are the advantages of a guaranteed universal life insurance policy.

  • Your insurance premiums will stay the same for life. In an economy that’s constantly fluctuating, this can eliminate a lot of financial stress as you get older. With this type of life insurance, you can plan ahead knowing exactly how much you are going to pay for coverage. Factors like your age and health status, which might cause changes in the cost of other life insurance policies, will not affect a guaranteed universal life insurance policy.
  • You’ll save money long-term. If you’re on a budget, it’s difficult to beat the cost of guaranteed universal life insurance. The premiums are usually much smaller than other policies, particularly whole or non-guaranteed universal life insurance.
  • You don’t have to deal with the caveats of a cash accruing life insurance policy. Non-guaranteed universal life insurance policies do allow you to put money into them, but they are intended for use as a life savings, not a death benefit. There are many downsides to using this as a money saving method. If you withdraw your cash at the wrong time, there’s a good chance you’ll have to pay the insurance company back with interest. You can avoid this with guaranteed universal life insurance, and put your money into a more stable savings account or investment.
  • It’s unlikely that you will outlive your insurance policy with a guaranteed universal option, unlike a term life insurance plan. If your family has a history of living for a long time, you can set your life insurance to expire at a higher age – many companies offer policies that last until you’re well over 100, should you live that long.

Is guaranteed universal life insurance right for me?

The great thing about guaranteed universal life insurance is that it is actually a good fit for most people, regardless of your lifestyle or health. However, there are a few instances in which you might want to avoid guaranteed universal life insurance and opt for something else. Here’s when you might want to look at other options.

  • You are on a very tight budget. Although guaranteed universal life insurance is much cheaper than whole life insurance, it is still more expensive than term life insurance. If you need to really minimize the amount you spend on life insurance each month, go for a term life insurance policy.
  • You may not be able to make payments on time. Guaranteed universal life insurance policies are some of the most strict when it comes to timely payments. If you don’t make your payments on time, you run the risk of losing your guaranteed premium. This is a risk you never want to take, so if you struggle with cash flow, you may be better off with another policy that offers protection for missed payments.
  • You want to use your life insurance policy to accrue money. Although there are many downsides to doing this, some people still want a life insurance policy that they can put money into. Since a guaranteed universal life insurance policy does not offer this feature, you will need to look for another option. Non-guaranteed universal life insurance usually offers this feature, as do some whole life insurance policies.

If you’re struggling to find a life insurance policy that fits your needs, ask your insurance agent about guaranteed universal life insurance. Since this policy addresses many of the problems that come along with other types of policies, it’s a great alternative to them. You’ll get the peace of mind you need knowing that you have comprehensive coverage, but you won’t be breaking the bank.

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