Quick answer
Guaranteed Universal Life (GUL) is permanent life insurance with a fixed premium and a guaranteed death benefit to a chosen age, typically 90, 95, 100, or 121. Premiums are 30 to 50 percent lower than whole life for the same face amount because GUL is designed strictly for the death benefit, with minimal cash-value accumulation. GUL is ideal for buyers who need permanent coverage at the lowest possible cost: estate-tax planning, business buy-sell agreements, lifelong dependents, and final wishes.
Best Guaranteed Universal Life Insurance Companies
The carriers below are the top-rated GUL providers we represent. Each is A.M. Best A or higher. We have removed American National (exited the market for all new life in 2023) and old AIG branding (now Corebridge Financial) per the Insurancy Playbook carrier status tracker.
| Company | Recommendation | Rating | Best for | Quote |
|---|---|---|---|---|
 |
Recommended. Custom Choice UL with no-lapse guarantee. Coverage up to $5,000,000. Strong rate-class structure. Agent assisted. |
★★★★★ Protective Review |
Best overall GUL. Most competitive long-duration guarantees and rate-class flexibility. | Go |
 |
Recommended. Life Step UL with no-lapse guarantee to age 121. Convertible from OPTerm. Agent assisted. |
★★★★★ Banner Life Review |
Best GUL for converting from Banner Life OPTerm without re-underwriting at the conversion deadline. | Go |
 |
Recommended. Custom Guarantee UL. Strong accelerated underwriting up to $1,000,000. Living benefit riders standard. |
★★★★★ North American Review |
Best GUL with accelerated underwriting and strong living benefits combination. | Go |
 |
Recommended. UL-G with secondary guarantee. Strong for high-net-worth and survivorship designs. Agent assisted. |
★★★★★ A.M. Best A rated |
Best GUL for high-net-worth applicants and survivorship (second-to-die) designs for estate planning. | Go |
 |
Recommended. Promise GUL with no-lapse guarantee. Strong design flexibility on death-benefit age. Agent assisted. |
★★★★★ A+ rated |
Best GUL design flexibility for buyers who want to choose specific guarantee ages between 90 and 121. | Go |
What Is Universal Life Insurance?
Universal life insurance is a permanent life insurance policy that’s similar to whole life in that it combines a savings vehicle with lifelong (hence, “permanent”) coverage. If the premiums are paid as required, the policy will not expire and death benefits will be paid out to the beneficiary. Typically, universal life provides a “cash value” that mimics a whole life policy on the surface but offers greater flexibility. With universal life policies, the savings element, premiums, and death benefit can be changed as the policy holder’s situation changes.
Depending on the specific product, the cash value in a policy can be tied to a money market account or a major stock index, or it can be invested into equity funds and bond funds. Once you purchase a policy, the insurance company establishes a minimum interest crediting rate per the amount stated in the contract. If the company’s portfolio earns more than expected, a portion of the additional amount is credited to your account, up to the cap rate. This is how policies can accumulate more cash value than whole life policies can.
Uses for Universal Life Insurance
For the most part, universal insurance serves the same purpose as other forms of life insurance, it serves as a financial protection and income replacement vehicle in the event of death. In the insurance world, you’ll see these types of life insurance policies being used more in advanced estate planning, after other tax-free/tax-deferred options (such as 401(k)s and IRAs) have been maxed out and people are looking for ways to minimize their current tax obligations that can’t be achieved with other investment vehicles.
How the Death Benefit Works
When it comes to the death benefit, you basically have two options: level or increasing.
With the level death benefit, the amount the policy pays out stays level throughout the life of the policy, and the policy will pay out either the death benefit or the cash value, whichever is greater. With an increasing death benefit, both the cash value and the death benefit increase over time, and both are paid out as part of the death benefit.
Which is better? That depends on your end goals. It’s a question best discussed with an independent life insurance agent.
How the Cash Value Works
Like whole life, universal life is permanent insurance. The difference between them lies largely in the cash value accumulation process. With universal life, the insurance company sets a minimum interest rate based on the contract for the policy (usually a low 2-3%). From there, if the insurance company’s overall portfolio gains in value, then part of the increase is added to the cash value of the company’s universal life policies, up to the maximum percentage amount listed in the policy contracts. If the company’s portfolio does not have a gain, or if it takes a loss, the insurance company is still obligated to pay the minimum interest stated in the policy contracts.
A major advantage to a universal life policy is that the cash value can be used to pay the policy’s premiums after a certain point, if the account has been built up enough to pay for the continual cost of insurance, although there are usually limitations as to how long you can do this. A whole life policy, on the other hand, will automatically take out a loan against the cash value if premiums are not paid.
With a universal life policy, premium payments go toward funding the savings component and the insurance component (i.e., the death benefit and administrative costs). For coverage to remain in force, the insurance component must be funded either through premium payment or a reduction of the cash value (if it has accrued enough). As long as the insurance component is funded, the contracted coverage is guaranteed to stay in effect.
How can you use the cash value that builds up in a universal life policy? You can either borrow against it (as in a loan) without tax implications, or you can withdraw part of the cash value, which may be subject to taxes. Always check with your financial adviser about potential pitfalls before withdrawing funds from a cash value policy.
Term Life Insurance vs. Universal Life Insurance
Universal life insurance is best understood as a “hybrid” of term life insurance and permanent life insurance, taking the best of both and adding in some unique features. The major difference between universal and term life insurance is that universal is meant to protect you for your entire life, whereas term is designed to protect you for a predetermined period. In addition, term life insurance does not have a cash value feature, and if a term life policy is canceled, then nothing is returned to you (unlike with a permanent life policy).
Universal life and term life insurance use pretty much the same calculations to establish premiums, but universal life averages the premiums for coverage to age 100 and charges you that average price for coverage. That’s why you pay more for this type of protection than for term life insurance.
Whole Life Insurance vs. Universal Life Insurance
The major difference between universal life insurance and whole life insurance is the overall flexibility of the premiums. As noted above, under certain circumstances universal allows you to use the cash value of your policy to pay your premiums if you need to, as long as the cost of insurance is covered. Whole life does not give you that option.
Both types of insurance allow for tax deferment of the cash value account and permit loans against the cash value. However, whole life does not let you increase or decrease the death benefit as your financial needs change throughout life. And although both policies offer the ability to skip premium payments (which is never advised) as long as certain conditions are met, a whole life policy creates a loan against your cash value that must be paid back, plus interest. With a universal life policy, the skipped premium is deducted from the policy’s cash value component.
The way interest accumulates is different, too. With universal life, interest is adjusted monthly, allowing for faster growth of the cash value. With whole life, interest is calculated on a yearly basis, which means the cash value increases more slowly.
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