Term to 100, as people commonly refer to it, isn't term life insurance at all. It's actually a form of universal life insurance known most commonly as Guaranteed Universal Life Insurance. While this life insurance product is technically a form of permanent cash value life insurance, it functions much more like term life insurance, and that's where it gets its nickname.
Outliving your Term Life Insurance
A major concern among term life buyers is the possibility that their coverage will expire while they are still alive and still in need of life insurance. Most people who buy term plan to reach financial independence by the end of the term period. If they accomplish this goal they theoretically no longer need life insurance coverage. But what happens if they don't reach their goal of financial independence?
For these people, the answer often stares apprehensively down two potential paths.
One option is buying a new term life policy at a significantly higher cost than the old policy because the insured is now many years older.
The second option is skipping life insurance either partially (with a reduced death benefit on a new policy) or altogether.
Neither option has significant appeal, so an insurance product that is less expensive like term life insurance, but lasts for the insured's entire presumed lifetime has a pretty broad appeal.
This product is our Term to 100, or more correctly stated, Guaranteed Universal Life Insurance.
How Does Term to 100 Work?
Guaranteed universal life insurance has a specific premium the policy owner must pay to guarantee the death benefit for a specific time period. The policy owner can choose at policy inception how long this guaranteed period will be–age 100 being very common.
The policy will accumulate a small amount of cash value, but it's best if the policy owner completely ignores this cash value. In other words, pretend it doesn't exist. Removing this cash value from the policy forfeits the guaranteed feature of the death benefit.
The policy owner must pay all scheduled premiums under the guaranteed premium schedule. If he/she does this, then the insurance company guarantees the death benefit will remain in force through the guaranteed period (again very commonly the insured age 100).
Term 80 or Term 90
There are some bonafide term life policies that last to an insured's age 80 or 90. These are term policies and they are considerably different from Guaranteed Universal Life Insurance. They will, however, guarantee a death benefit through the insured's specified age (e.g. age 80 or age 90).
These life insurance products are most commonly annually renewable term life insurance policies, which means the premiums is not a guaranteed level amount throughout the entire lifetime of the policy. Instead, the premium “renews” each year at a new (higher) amount. So long as the policy owner is will to pay this amount, he/she can keep the policy in force.
The key difference between this type of life insurance and the Guaranteed Universal Life Insurance mentioned above is that the premium can and does change with these Term 80/Term 90 policies. The Guaranteed UL policy premium will never change throughout the life of the policy provided the policy owner pays the required premium on time.
How does this Differ from Whole Life Insurance?
Whole life insurance provides a guaranteed death benefit for the insured's entire life in exchange for the payment of a specific and guaranteed premium. This is certainly a similarity between Whole Life and Guaranteed Universal Life.
However, Whole Life Insurance accumulates cash value that the policy owner can remove from the policy without sacrificing the guaranteed death benefit feature of the contract. Whole Life policies also commonly earn dividends, and these dividends further augment the death benefit and cash value of the policy.
Many dividend-paying Whole Life policies will achieve a death benefit that grows over time. This can help hedge against the impact inflation has on a death benefit's true purchasing power. Guaranteed Universal Life does not have an increasing death benefit feature, so the policy owner should carefully consider the adequacy of his/her death benefit under these plans given the possibility that costs of good could rise in the future when the death benefit
