A no-lapse guarantee rider on a universal life policy provides that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A no-lapse guarantee, the basis of guaranteed universal life, ensures that the policy stays in force for a stated period or until a specified age as long as the required minimum premium is paid on time. Coverage continues even if the cash value is insufficient to cover monthly deductions, though the cash value itself may lapse to zero. The guarantee therefore protects the death benefit, not the cash value. It is a valuable feature for clients who want permanent coverage with lower premiums. The minimum premium is disclosed at issue and must be maintained to keep the guarantee effective.
Why the other options are wrong
- Cash value and death benefit are different values; the guarantee protects the coverage, not the cash value balance.
- Universal life premiums can vary, and the no-lapse guarantee does not freeze the premium at a single level.
- The policyowner can still adjust the death benefit in most universal life designs; the guarantee does not freeze the face amount.
Memory hook
No-lapse guarantee = keep paying the minimum and coverage stays, even if the cash tank runs dry.