Advantages of Guaranteed No-Lapse Universal Life (GUL) Insurance

The secondary guarantee of NLUL policies promises policyowners that if they play by the rules and maintain timely specified premium payment levels, their policies will maintain at least a level death benefit without ever requiring an increase in premiums for the insured’s lifetime, even if the cash value account balance falls to zero or below. However, this promise comes with considerable tradeoffs in costs, other risks, and flexibility.

There are several advantages from a design standpoint for the company and the insured as well. Companies are able to offer these guarantees for several reasons, including:

The no-lapse guarantee is a death benefit and premium-level guarantee only and does not affect the cash value guarantee which permits the insurer to set the premiums lower than for policies without the no-lapse guarantee.

The various criteria required to maintain the no-lapse guarantee help to ensure premium persistency, which enables better pricing.

Because of the more predictable cash flows, no-lapse guarantee products can support longer-term investment strategies that can boost the underlying asset yields and reduce required premiums.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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