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Indexed Universal Life Insurance policies offer tax-deferred cash accumulation for while also providing a life insurance death benefit to the beneficiaries of the policy. People who are interested in purchasing permanent life insurance but wish to take advantage of possible cash accumulation through a link to an equity index could consider using an Indexed Universal Life Insurance policy. These policies are commonly used as Key Person Life Insurance for companies, directors, partners, and business owners. They are also commonly used within premium financing plans or other estate-planning vehicles. These Indexed Universal Life Insurance policies are not for the average consumer and would be more of an advanced strategic policy because they can be difficult to understand and they do not provide the same type of death benefit protection as a Whole Life Insurance policy or a Term Life insurance policy.
What is an Indexed Universal Life Insurance Policy and how does it work?
With an indexed Universal Life Insurance policy, a portion of the premium that is paid (monthly, quarterly, semi-annual, annual) pays for an annual renewable term life insurance death benefit that is based on the age, sex, and health status of the policy holder/insured. Typical life insurance fees are deducted from the premium and the remaining dollars are contributed to the cash value component of the policy. The entire cash value balance is then credited with interest based on the performance of an index (typically S&P 500). It is important to note that the policy and the cash value that is in the policy do not directly participate in the stock market. This is not a securities product, it is a life insurance policy. Indexed Universal Life Insurance policies typically offer a guaranteed minimum fixed interest rate and a choice of indexes. If the index performs well, the cash value can see more growth than in another permanent life insurance policy. If the index does not perform well and actually decreases, the policy is still credited with the guaranteed minimum interest rate.
Indexed Universal Life Insurance policies are complex and you should review an actual sales illustration to see if this is the right product for you. Let us know if you would like to receive more information or personalized indexed universal life insurance quotes. There is no obligation for you to do business with us by receiving these quotes of course. Knowledge is power.