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Although equity indexed annuities have been a number of years ago, insurance, equity indexed universal life energy (EIUL) is a relatively new life insurance market. EIUL is a spin on universal life (UL) insurance, a popular way of doing politics, because it can reduce or increase the death benefit as your needs change and premiums can be adjusted accordingly. UL policy also build a cash value against which you borrow or use to payAwards.
The share capital indexed concept is relatively simple: the amount of interest credited to your policy cash value for the performance of a particular index (S & P 500 is bound by one of the most popular), so that in years the index is well Your interest rate credit will be increased, and in years when the index is bad, your credit lower interest.
Most of the measures to ensure that your interest rate can never fall below zero credit, so not losing money (not easy to do). They also have a cap, however high rate of credit that will share with you. The range of possible rates is often described as offering "upside potential with downside protection to."
How it works
In general, the large selection to the purchaser of life insurance if you go with a variable universal life secure energy policy "Accumulation," offers a guaranteed minimum rate, But Potential limited cash or risky to go with a more "> Terms of politics that offers potential for greater profits, but no protection against losses on the market.
EIUL insurance is an attempt to bridge the gap between these two approaches to fill. EIUL is universal life insurance, where the index of the current value is safe, associated with one. If the index exceeds the end of the year, the cash value grow. If the index stays flat or goes down, the cash value earns a minimum guaranteed interest rate (for example, 2 percent). It should be noted, however,that if the index rises, it means that your money to increase the value of the entire increase to reflect, as well as taxes and dividends and capital gains included in net present value calculation.
But are these new products to the best of both worlds? Let's look at both sides of the coin.
The pros and cons
One advantage of EIUL is the potential for higher credited interest rate of a traditional universal policy. Another advantage is that it offers moreProtection against burglary as a variable life insurance market.
Stephen Mitchell, an analyst of the products and the competition for Pacific Life Insurance Co., California, based in Newport Beach, points out that these products are not a panacea, can offer "an attractive middle ground for buyers, since the recession the market from 2001-2002 and are looking for guarantees. "These products, while 'the peace of mind for buyers seeking a mix of guarantees and offer somePotential to accumulate cash.
It may, however, disadvantages with equity indexed products. The main disadvantage of an indexed product that has a slightly higher risk of a traditional universal policy. The cap rate
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