Guaranteed Universal Life Insurance (GUL) vs. Whole Life Insurance: Which Is Better?

Thang Truong
Thang Truong
Updated on:
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It’s perfectly normal to want to provide for your loved ones in case the worst happens, but finding the right insurance to meet your needs is a bit like Prince Charming searching for Cinderella. You have to check out a few different policies before finding your match. 

To help with your search, we’re comparing whole life insurance with guaranteed universal life insurance to see the benefits of each insurance policy.

What is Whole Life Insurance?

As the name implies, whole life insurance is a type of insurance designed to last a lifetime, unlike term life insurance, which only lasts for a set number of years before expiring. This permanent life insurance gives you coverage for the rest of your life as long as the premiums are paid. 

Whole life insurance usually requires premium payments for a set length of time, usually about 20 or 30 years or the rest of your life, entirely depending on you. After this, the policy is considered paid up and will remain in effect until the policyholder’s death.

Another great feature of whole life is the cash-value component that grows with time. The cash-value of a policy is additional money that grows in the policy over the years. It is made available in addition to the guaranteed death benefit for policyholders. The cash-value is usually taken from a portion of the premiums and also increases at an interest rate of about 2% per year. Policyholders can draw from this cash-value, usually tax-free while still alive, which makes it a viable investment opportunity too. 

In exchange for added cash-value, whole life insurance policies are usually more expensive than other types of insurance. For instance, a $300,000 whole life insurance policy has a potential premium of over $7,000 for a 40-year old male.

>>MORE: Is Whole Life Insurance Good for Retirement Savings?

What is Guaranteed Universal Life Insurance (GUL)?

If you are put off by the potential expense of a whole life insurance policy, you might want to look into guaranteed universal life (GUL) insurance. This type of permanent life insurance blends the best of whole life with universal life insurance. Policies are also guaranteed for life, like whole life, but the premiums also are more affordable, as with universal life insurance. Like universal life, the death benefit can also be adjusted at any point as needed. 

It is called “guaranteed” because this policy will provide a permanent guaranteed death benefit, which is the face value of the policy, when the insured passes away. This feature is exactly the same as in whole life policy.

The guaranteed universal life insurance policy also has little to no cash-value growth. This will depend on the insurance provider’s offerings, but any cash-value growth will likely be around 1% per year. 

A GUL also usually has a set payment period before being considered paid up. The set payment period is up to the buyer to decide, it can be 10, 20, 25 or 28 years. This is a good thing for policyholders who want the peace of mind that comes with knowing your insurance is paid for and the death benefit will be available for loved ones.

>>MORE: Understanding How Guaranteed Universal Life Insurance (GUL) Works

Similarities Between Whole Life Insurance and Guaranteed Universal Life Insurance

  • Both are permanent life insurance
  • Both can be considered paid up after a set number of years
  • Both have a guaranteed permanent death benefit
  • Both have a set premium that never increases

>>MORE: How to Use Life Insurance in Retirement Planning? A Case Study

Differences Between Whole Life Insurance and Guaranteed Universal Life Insurance (GUL)

  • Whole life allows cash-value growth, usually 2% per year
  • Whole life allows loans and withdrawals against the cash-value
  • GUL has an adjustable death benefit
  • Whole life insurance is much more expensive than GUL

>>MORE: Is Whole Life Insurance Worth It? A Case Study

Compare a Whole Life Insurance Quote with an Guaranteed Universal Life Insurance (GUL) Quote

To really see the differences between a whole life insurance policy and a GUL policy, we obtained illustrations for two men in very similar circumstances. The first is 40 years old, a non-smoker who is interested in a MassMutual Whole Life Legacy 20 Pay policy. The second is a 40-year-old man, non-smoker, who is interested in the PruLife Universal Protector insurance policy from Prudential. Both policies have an initial death benefit of $300,000.

Whole Life QuoteGuaranteed Life Insurance Quote
Carrier and ProductMassMutual Whole Life Legacy 20 Pay Prudential PruLife Universal Protector
Permanent CoverageYesYes
Annual Premium$7,083$2,805
Guaranteed Cash-Value at 90 (*)$258,222N/A
Guaranteed Death Benefit at 90$300,000$300,000
Scheduled Premium Period20 Years20 Years

(*) If you withdraw any amount from the cash value account at any time and don’t pay back, plus interests, the guaranteed death benefit amount will be deducted on dollar-for-dollar basis.

As you can see from the table, whole life insurance is more than 2.5 times as expensive as GUL at $7,083 versus $2,805 per year. Or Guaranteed Universal Life insurance policy is just less than 40% the cost of a similar whole life policy. However, whole life policy allows you access to a guaranteed cash value account that you can borrow against when you need it.

>>MORE: Whole Life Insurance Cash Value: Everything You Need to Know

Final Thoughts

There is more than one way to ensure that you get lifelong insurance coverage-from getting a whole life insurance policy to signing up for a guaranteed universal life policy. Of course, each has its own trade-offs for policyholders. The GUL offers a guaranteed permanent death benefit that doesn’t really increase in value or size, while a whole life policy allows you access to a guaranteed cash value account. However, whole life policy is almost three times as expensive as a GUL.

Thang Truong
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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