What Is Indexed Universal Life Insurance?

Posted on Sunday, November 8, 2009
Filed under Indexed Universal Life Insurance

There are different types of policies available in the market and you have to make a choice of a policy that suits your needs. With growing demands, you need to plan your future accordingly and hence it is important that you look for a policy that will give you the maximum returns at the end of the policy. There are various questions that you must consider before you decide to go for a policy, as all policies have different features and interest rates. Universal Life Insurance too offers different kinds of policies, such as the Fixed-Rate, the Indexed and the Variable life insurance policies.

Indexed Universal Life Insurance Policy allows the policyholder to put in a part of the premium amount into the stock market index as cash value growth while the other part goes into the death benefit account. The policy has the flexibility of the allocation of premiums, which is an ideal feature of Universal Life Insurance. The interest rate on this amount, which the policyholder allocates to the stock market index, does not generally collapse, as it is not directly invested into the stock market. However the rates have the potential to grow in a situation when the stock market is on the rise.

The Indexed Universal Life Insurance companies commonly set a cap, where the maximum rates that a policyholder can earn is between 4-12% of the cash value while the minimum is 0-1%. Popular Stock Market Indexes such as Nasdaq and S&P 500 are used to invest the cash value amount of the policyholder. Policyholders however, are not allowed to decide where they would like their money to be invested, the decision lies totally in the company’s hands. The Indexed Universal Life Insurance Policy is ideal for those who are interested in viable interest rates and have the kind of money to invest in it, as this can be a more expensive policy.