No-lapse Guarantee

What Does No-lapse Guarantee Mean?

A no-lapse guarantee is a provision in a life insurance policy that ensures the death benefit for the insured is guaranteed, regardless of the policy’s cash value. Policies with this feature typically have lower premiums than other life insurance products because they offer little to no cash value. However, the guarantee remains valid only if premiums are paid consistently and on time.

This type of policy is also referred to as guaranteed universal life insurance. It works differently from a standard universal life insurance policy, which builds cash value alongside the death benefit and lets the policyholder adjust premiums within certain limits.

Insuranceopedia Explains No-lapse Guarantee

If premiums are paid on time, the death benefit is guaranteed. However, failure to pay on time may result in the insurance company revoking this guarantee.

Policyholders seeking to build cash value through an insurance product should consider other types of life insurance. Unlike many other policies, payments made toward a no-lapse life insurance policy are not invested to generate returns for the insured. That’s why these policies are usually cheaper than whole life or indexed universal life, though it’s worth comparing the average cost of life insurance across categories before deciding which structure makes sense.