No-Lapse Guarantee Universal Life
As a result of the lack of flexibility combined with guarantees in insurance products,No-Lapse Guarantee Universal Life (NLG) was created. This product has similar features as a typical universal life product, but offers the following guarantees:
- Death benefit
- Interest rate
No other product has all of these features and allows the premiums to be customized in length. The premiums paid for these policies ensure that the policy expenses are covered during the insured’s lifetime.
This product is often the most appropriate product to use for estate planning and transferring wealth where cash value is usually not as important as providing low cost death benefit for life. For policies that are owned inside a life insurance trust, the general goal is to pay the least amount of money for the maximum death benefit. Further, to be able to contractually guarantee the policy from not lapsing may be of utmost importance.
- It is important to note that the timing of premium payments with these policies is very important. If payments are not made on time, this can jeopardize the guarantee and/or length of the guarantee.
- The main advantage of NLG policies is having the flexibility and guaranteed elements in one product.
- The main disadvantage of contractually guaranteed universal life is the required timing of premium payments and the fact that the cash value is not significant and maybe even non-existent in some cases (depending on the carrier). This lack of cash value can limit the client’s options to make future changes in coverage.