Unlike the consumer electronics industry or wireless industry, life insurance products don’t change frequently…that is, until recently. In the past, the choice of life insurance products was fairly limited – you could choose whole life, universal life or term life. In recent years, we have seen the insurance industry invent innovative products to meet the needs of the consumer.
Within the last several years, we have seen the birth of Return of Premium Life Insurance and Universal Life Insurance with secondary guarantees (lapse protection), to name a few. Recently we have seen the “creation” of another new product – I’ll call it “Term UL (Universal Life),” for lack of any other name. One insurance carrier recently replaced their term products with Term UL. This product is basically Universal Life Insurance with a guarantee for a specified “term,” be it 10, 20 or 30 years. In essence, it works just like a term policy – you have a death benefit for a specified number of years and at the end of the “term,” the policy is “done.”
The advantage of this product is that you can choose to pay more premium to extend the guarantee at any time during the term period. If, at the end of the term, you decide you still have a need for life insurance, you pay a specified premium, and the policy will continue. The rates are guaranteed when you purchase the product, so you know from the beginning what you will pay if you extend. With a term policy, you can always renew the coverage at the end of the term (on an annual basis), but the premiums are usually cost-prohibitive. You can also convert to a Universal Life policy, but you won’t know the rates or policy details until you do convert.
I have already place a few clients with this product, where I thought it was appropriate and will continue to check its appropriateness with future clients. It looks like some other companies will be releasing a similar product soon, so competition should keep the premiums within a reasonable range.