Things To Consider Before Buying Guaranteed Universal Life

I remember when I was a younger buck and first living on my own, eating Ramen noodles and baked potatoes for the majority of my meals because they were so cheap.  If I needed an appliance or anything else, I usually bought the cheapest I could find.  Some of the things I bought broke quickly and had to be replaced soon.  I learned early on that the cheapest things are not always the best value. 

The same thing applies to life insurance.  I did a previous post about why the cheapest term insurance is not always the best, but this is also the case with the best guaranteed universal life insurance policies or other permanent life insurance.    

If you’re going to buy a guaranteed universal life or another permanent life insurance policy, you should consider things like the financial rating of the insurance company, any living benefits offered, any guaranteed cash value in the policy, if the company offers a dial in guarantee at a lesser cost than the “lifetime” rate so you can pay less to have a guaranteed level rate to age 85, 90, etc., or if the company offer any type of “table shave” or underwriting exception for people with minor health issues like adult onset diabetes, mild coronary artery disease, being slightly overweight, etc. 

All GUL policies are not created equal.  Below is a summary of some of the best GULs and their benefits. 

All rates below are for a Male, Age 50, Preferred Plus Non-Smoker, $250,000, Guaranteed Level Rate for Life  

Company                         Annual Cost    Living Benefits   AM Best   Cash Value 30 Yrs
American General            $2,118                       1                        A                  $23,557
Protective Life                   $2,187                      2                       A+                    $0
Prudential                          $2,210                      2                       A+                    $0
Penn Mutual                      $2,218                      2                       A+                    $0
AVIVA                                 $2,225                      2                       A-                     $0
ColumbusLife                    $2,249                      3                       A+                    $0
North American Co.         $2,251                      2                       A+                    $0
HartfordLife                      $2,287                      2                       A-                     $0
United ofOmaha               $2,315                      2                       A+                    $0
Banner Life                        $2,350                      1                       A+               $19,937
Nationwide                        $2,430                      2                       A+                    $0
AGLA                                  $2,506                      3                       A                  $25,845
Principal National            $2,506                      1                       A+                     $0
CincinnatiLife                   $2,535                       1                       A                        $0
LincolnNational               $2,583                       3                       A+                     $0
Genworth                           $2,648                      1                        A                       $0
Transamerica                    $2,693                      2                       A+                 $80,790

The living benefits column above is to show how many different living benefits each company offers. The companies that show three living benefits offer all of the living benefits that are currently available on life insurance policies.  The more living benefits the insurance company offers, the better. 

Living benefits that are offered by each insurance company can also vary depending on the state that you live in, and some insurance companies may charge an additional fee for some living benefits.  

Living benefits consist of an accelerated death benefit if you’re diagnosed with a terminal illness, so you can access a portion of the life insurance prior to death and/or a chronic illness benefit or long term care benefit for which you can receive a cash payment or payments from your policy when you are no longer able to do two of six activities of daily living. These activities include eating, bathing, continence, dressing, toileting or transferring, and/or a critical illness benefit or a cash payment from your life insurance policy triggered by certain conditions such as heart attack, stroke, or invasive cancer. 

Almost all life insurance companies do offer the accelerated death benefit if you are diagnosed with a terminal illness and many also offer the chronic illness or long term care benefit, but only a limited number of insurance companies are offering the critical illness benefit. 

As you can see from above, the policy with the best price may not always be the policy with the best value depending on what benefits are most important to you. 

While the above information is accurate as of today, life insurance rates, products, and benefits are constantly changing, as most life insurance companies want to be the best in at least one area.   

If I’m 50 in good health and wanted the absolute lowest $250k permanent life insurance rate, regardless of other benefits, I’d buy the American General rate above. However, if I wanted all living benefits available, I may consider Columbus Life, but if I wanted all living benefits and some cash value I may opt for the AGLA rate. If cash value was one of the most important things to me, I may buy Transamerica.

All rates are based on age, health, and the amount of life insurance purchased.  While American General has the lowest rate under the scenario above, they will probably not have the lowest rate if you are older or younger, have some health issues, or if you’d like a different amount of life insurance. There are also other insurance companies like Met Life, Pacific Life, American National Life, Minnesota Life, AXA-Equitable, Lincoln Benefit Life, John Hancock, and Mass Mutual that offer GUL products that may be competitive under other scenarios. 

Since you may have some health or other issues, and since cost is almost always a big consideration for most of us, a big factor in your decision on what to purchase may come down to price.   If the cost of two different policies is close, but the slightly higher rate has better cash value and/or more living benefits, then that policy may be a better value for you.

The point being is if you only focus on price, you may lose out on some benefits that could be valuable to you someday. If you’re going to apply for a GUL or another permanent life insurance policy, you should ask your agent about other benefits the policy may offer. In addition, if there are no other benefits besides the life insurance proceeds upon death, your agent may not be offering you what is best for you. 

If you have any questions or if you would like more information on GUL products, you can email me at [email protected] or call me on the toll free number above.