The term “Guarantee” for the obvious reason, can be expensive. It is particularly true when a life insurance company sells a guarantee product, it tends to be costly.

Term life insurance is guaranteed for a fixed period, normally 10, 20, 30 years. It is least expensive because it’s in force only for a period of time and has no cash value. Whole life insurance is guaranteed for the whole life to pay out death benefit, and it also guarantees cash value accumulation, so it’s the most expensive of all. Guaranteed Universal Life (GUL) also guarantees to pay out death benefit throughout the entire life, but it does not accumulate much cash value. Therefore, it is less expensive than Whole Life, but more expensive than Term life.

Then here comes Guarantee Index Universal Life product (GIUL). It’s a protection/death benefit-focused guarantee universal life with cash value potential that’s accumulated through index interest crediting, which is similar to that used by a regular indexed universal life (IUL).

As you can see on the illustrative table below for a 50-year-old male preferred non-tobacco case. GIUL has 19% lower premium. At policy year 20, the cash value of GIUL is more than that of a GUL. Although GIUL’s guarantee is only up to age 87, but it actually can carry all the way to age 105, same as that of GUL.

Now you would say, guarantee only up to age 87 is just not enough. Let’s put that into perspective. Imagine this 50-year-old purchasing an IUL policy to have a Guarantee-to-age of 87. The index would need to spend the next 37 years in negative territory. The S&P 500®, for example, would have to look something like this…

Moreover, looking back to S&P 500® history, the worst 30-year period was from 1928 to 1957. Run those annual returns through a hypothetical 9% Cap Rate index interest crediting strategy, with a 0% guaranteed interest rate. The average annual return rate in that worst 30-year period was 4.5%. In other word, to have this example GIUL policy carry to age 105 is really a piece of cake.

Next time if someone talks you into getting a Whole life insurance, you may want to consider GIUL which gives you guarantee as well as cash value accumulation with about half of the cost that you pay for a Whole life insurance policy.