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  • Guarantee death benefit on cash value life insurance
  • July 22, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    One of the biggest concerns with universal life (UL) is that the death benefit is not guaranteed for the life of the policy.

    Most insurance policies terminate (mature) at age 95 or 100 and cash out at this time, leaving the insured to be self-insured. However, some companies are now starting to offer policies up to age 120.

    When a policy matures or terminates, it leaves the client with the cash value, which is often less than the death benefit. This payment is also reported to the Internal Revenue Service (IRS), on a 1099 form for the amount of cash value.

    This potentially widens the gap further between the cash value at that time and the death benefit of the policy.

    Nowadays, a number of companies are offering and/or deferring the maturity of a life insurance policy beyond the age of 100. This is done through one of two methods – the death benefit guarantee or the no-lapse guarantee.

    There are two methods to guarantee the death benefit on cash value life insurance policy, which are death-benefit guarantee and no-lapse guarantee.

    Death Benefit Guarantee

    Provided that the required premium payments are made and no loans have been taken out, this guarantees that the policy will remain in-force. It also depends on the amount and timing of premiums paid, withdrawals taken, and any changes made to the policy.

    The contract will remain in effect for the periods shown, if these premiums are paid exactly on the first day of each policy year and no loans or withdrawals are taken. The premiums for this option are usually not much higher than a policy without a death benefit guarantee.

    No-Lapse Guarantee Clause

    Under a typical clause, the policy is guaranteed to stay in-force for a number of years, if required premiums payments are made. This is called a no-lapse guarantee.

    Even though it contains the no-lapse guarantee, this policy may provide non-forfeiture benefits – such as cash surrender value – that are less than those that would be provided if the no-lapse guarantee were issued as a separate policy. An example would be a term policy.

    When considering the purchase of this policy, you should consider the value of higher non-forfeiture benefits versus the level of the premiums required to keep your policy in-force.

    If you seek further assistance or additional information, please feel free to email me at

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

Creative Commons License
Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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