What is index universal life insurance?
Index universal life is a type of universal life insurance that allows policy owners to allocate cash value to a fixed account or to an equity index account. These types of insurance policies are very volatile but less risky as the policy owner is not actually investing money into equities.
Who is this type of life insurance for?
This type of life insurance is for individuals who want to protect their families and save for retirement. This type of policy offers a cash accumulation for retirement and a death benefit. These types of policies are more difficult to understand, so it should be for someone who understands the details of insurance policies effectively.
How does this type of insurance work?
As a policy owner pays a premium, part of it is allocated towards a renewable annual term policy. Fees are then paid and the rest goes to the cash value. Interest also goes to the cash value based on the equity index. The police owners decide how much is given to the fixed and indexed accounts. The indexed account is compared at the beginning and end of the month. If there is an increase, interest is given to the cash value. The gains are credited based on a percentage rate set by the insurance agency.
What are the different types of coverage in existence for this type of policy?
Indexed universal life is its own type of life insurance policy. Within the policy, however, are contained certain aspects. There is an annual point-to-point which assesses the growth in the policy annually. The monthly average is the amount that is credited to the account based on interest and equity. The dividend interest is a yearly dividend amount assessed based on where the equity is located.
what are the major benefits of this type of life insurance?
The premiums for this type of life insurance are very low and any accumulations in the cash value do not have taxes on them. There is also significant flexibility on the policy owner’s part in determining how much risk he or she wants to take. The death benefit is permanent, it is not risky according to the stock market, the cash value can be reached at any time without consequence and there are no limitations on annual contributions.