Lifetime Coverage:

The policies quoted here are designed to continue for the rest of your life. As long as the premium is paid on time, the insurance company is bound to keep the policy in effect to the specified age at a guaranteed level premium.

This type of policy, from various insurance companies, is specifically designed to be the lowest cost way of having permanent insurance. They will generate the minimum amount of cash value so as to allow the premium cost to be the minimum. Any cash value generated is used up in the later years of the policy in order for the policy to continue in force to the lifetime age specified.

The coverage is for your whole life but is not "Whole Life Insurance". It is Universal Life Insurance designed, and guaranteed, to stay in effect for as long as the level premium is paid. It has a level premium like a level premium term policy, but it is Universal Life Insurance so it can produce a lifetime duration of coverage.

The premium can be for the life of the policy or can be pre-paid, e.g., in a lump sum ("single pay") or over a limited number of years e.g., 10 years, 20 years, or to age 65 or age 100.

Compare to Whole Life:

Whole life insurance is also designed to last for a lifetime, and have level premiums, but it is also designed to have a continually growing cash value that increases each year until the cash value finally equals the amount that you are insured for. So if every insured lived long enough, and the level premium was always paid, the insurance company would pay the accumulated cash value, which would then equal the insured amount, to the beneficiaries.

The whole life policy design allows the insurance company to insure individuals for life instead of just for a limited period like Term Life, in a manner designed to be financially stable. The policy owner can borrow against the cash value, but the primary reason for the cash value buildup is to protect the financial integrity of the insurance company, not as a special feature for the consumer.

The 'amount at risk' for the insurance company is the difference between the cash value and the insured amount. In a sense, each policy stands on its own foundation. At death, the cost to the insurance company is only the amount at risk, if any, not the whole insured amount. Because Term Life has a fixed expiration it inherently has less risk for the life insurance company than a commitment to insure for a lifetime.

A More Attractive Alternative:

In contrast, the cash value of these level premium Universal Life policies are designed to start being used up at the right time so as to enable each policy in the pool to last for the life of the insured. They have a lifetime 'no-lapse' or 'secondary' guarantee that keeps the policy in force even if the cash value of a similar policy may have been depleted and could no longer support the death benefit at the target premium. That means that as long as you pay the specified target premium, your policy is guaranteed to stay in force no matter what the future earnings of the insurance company are.

Without such a guarantee, since market interest rates change and investment returns gained by insurance companies can change, a Universal Life policy might not be credited with enough interest to stay in force without an increase in premium payments.

Generally, the premium cost for these 'whole term life insurance' Universal Life policies is significantly less than what Whole Life currently costs for a similar death benefit. Ordinary Universal Life could also easily demand a higher premium in future years to stay in effect at the same death benefit.

Reliability:

All guarantees place an additional burden on the guarantor. Any guarantee is only as good as the guarantor, so the insurance company making this guarantee needs to have a longer life than you do.

Whole Life, Term Life, and ordinary Universal Life may well be financially safer for an insurance company to sell. So the ongoing financial strength of companies offering lifetime no-lapse guarantees for a level premium Universal Life policy is an important consideration. A court supervising rehabilitation could order an increase in premium if the insurer became insolvent, the insolvency perhaps caused in part by being unable to meet the type of guarantee not made in other products.

The insurer also benefits from Guaranteed Level policies lapsing, especially in later years, for non-payment of premium, because there is little or no cash surrender value to pay out. Therefore, a company may be very strict in terminating policies if any premium is not paid on time. This could occur when the policy owner is the most vulnerable to such an oversight.

Guaranteed Level Premium policies are very attractively priced, but the pros and cons all need to be considered. We are here to help you compare and evaluate.