I love Guaranteed Death Benefit Universal Life (GUL), don’t get me wrong. They came into being during the time traditional UL was not performing as it was originally intended. Therefore, the carriers offered an opportunity for the consumer not to lose their death benefit no matter what happened to interest rates. So, as long as the client pays the premium and pays on time, the guarantee will stay intact. This is key! Your client must pay the premiums and pay them on time. How these contracts were built was based on very specific age, classification, mortality cost, administration costs, and interest rates. If the premiums fall out of those parameters because they are paid early or late, it can lessen or completely negate the guarantee and cause unwanted “gotchas” later in the life of the contract, also causing very uncomfortable conversations with your clients.
Now that being said, there are carriers that have a grace period for the premium payments that allow the client to pay a bit late and still have the premium credited as if it were paid on the due date. Most of these types of grace periods are within 30 days of the due date and they are not on all GUL contracts. Now this should not be a problem if your client chose to pay by monthly bank draft, but with other payment modes, it might.
So how do you make sure you don’t have an uncomfortable conversation with your client on the “gotcha“? Make sure you are doing periodic policy reviews with your clients. Not only will you be able to discuss the importance of paying their premiums on time, but it will also give you the opportunity to see if their need for life insurance has changed or perhaps get a referral.