Important Questions to Ask About Universal Life Insurance with No Lapse Guarantee Policies & Proposals
Amount: Is the amount of life insurance correct for your client’s needs? Should the death benefit be a level death benefit or an increasing death benefit?
Basic Assumptions: Are the illustrated assumptions accurate and reasonable? (i.e. age, sex, health underwriting)
Ownership: Is the policy ownership structured correctly within your client’s estate, business or financial plan?
Beneficiaries: Are the primary and secondary beneficiary designations structured correctly within your client’s estate, business or financial plan? Who is responsible to ensure that policies have appropriate designations? (i.e. attorney, CPA, insurance representative, client)
Maturity Date: When is the policy maturity date? What happens to the death benefit at the policy maturity date assuming the policy is in force on the maturity date?
Guaranteed Premium: Does the policy have a guaranteed premium that will guarantee the death benefit to the maturity date? If this guarantee is met, is the entire death benefit guaranteed beyond the maturity date, or does the guaranteed death benefit reduce or terminate at the maturity date?
Cost: Is the universal life insurance policy cost effective after the underwriting (insurability determination) is completed?
Insurance Company: What are the size and financial ratings of the life insurance company? Has the company been downgraded by the rating agencies recently?
Catch Up Provision: If the guaranteed premiums are not all paid in full or on time, what happens to the validity of the guarantee? Is there a catch up provision to keep the guarantee from lapsing? The catch up provision on guaranteed universal life insurance policies varies significantly. It is important to understand how the guarantee works before and after the policy maturity date, as well as the flexibility or inflexibility in the guarantee catch up provision.
Policy Cash Value: Does your client understand that guaranteed premium universal life insurance policies often have substantially reduced cash value or no cash value? Is there any need for policy cash value, or is the policy being purchased strictly for the guaranteed death benefit?