An Introduction to Guaranteed No-Lapse Universal Life (GUL) Insurance

Briefly, Guaranteed No-Lapse Universal Life (GNLUL or just NLUL), also called guaranteed universal life, Secondary Guarantee Universal Life (SGUL), universal life with secondary guarantees, or other variations thereon, is a variant of the regular universal life design. The no-lapse feature is a secondary guarantee promising owners that their policies will remain in force and pay death benefits so long as they continue to meet the secondary guarantee requirements (essentially, to pay required minimum premiums on a timely basis). The policy may make the secondary guarantee most commonly as a provision within the policy, but it may be found as a rider attached to the policy.

In a nutshell, the principal objective of NLUL policies is to provide policyowners with a guaranteed death benefit (for a specified period up to the lifetime of the insured) for the lowest possible guaranteed premium level. In essence, therefore, the insurance industry has designed NLUL to serve as an extended-period, low-cost, level-premium, fixed-death-benefit TERM insurance policy. Like regular term policies (and unlike most regular UL policies), the focus is on providing the maximum guaranteed death benefits for the lowest premium cost; NLUL develops relatively little or no cash value. Unlike regular term insurance policies, which insurers typically do not issue for terms exceeding thirty years and which they usually will not issue for such terms on insureds over age fifty, insurers will issue NLUL virtually at any age of the insured and will permit guaranteed coverage to continue until the death of the insured, even if the insured’s life expectancy exceeds thirty years.

As with all such promises in life insurance (and in life), the secondary guarantees come with corresponding costs and tradeoffs, as discussed in more detail in subsequent sections.

Although insurance companies have built their NLUL policies upon the regular UL design platform, the critical point readers should grasp is that NLUL and UL are very different animals. NLUL policies have distinctly different objectives and more specialized applications, offer quite different levels of flexibility and unique characteristics and use different internal valuation methodologies than regular UL policies with which readers may be more familiar. These issues and features are addressed further in later sections of this chapter.

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

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