Indexed Universal Life Insurance
North American (NACOLAH)
Equity-indexed universal life insurance, or indexed universal life insurance (IUL), is permanent life insurance that offers all the benefits of universal life with accumulation values tied to a stock market index. Indexed Universal Life Insurance is a type of permanent insurance with the potential for greater cash value accumulation without the downside risk of losing money. Interest is credited based on the Client’s choice from a wide range of indexed and fixed accounts (subject to caps, floors, and participation rates). Because your client’s do not participate directly in the stock market, the credited interest rate in NEVER less than zero.
The Benefit of IUL
An IUL policy has a fixed interest rate component as well as an indexed account option. Whereas traditional UL may credit 4 percent to 6 percent, IUL has the ability to receive index-linked gains as high as 18 percent or more. In years in which the index does well, interest-crediting rates will rise, and in years in which the index performs poorly, interest crediting will fall. The policy owner can reap the rewards of stock market-type gains and be protected with minimum-guaranteed interest rates in case of stock-market losses. IUL otherwise has all of the typical features of traditional UL and operates under the same policy mechanics.
IUL vs. UL
The major difference with IUL is the option to participate indirectly in the upward movement of a stock index without accepting the normal risk associated with investing in the stock market. The actual interest credited to a policy’s cash value is determined by the changes of an equities index. Most insurance companies use the S&P 500 Index as the underlying index for their IUL product. This combination of the potential to realize higher upside returns without the downside risk makes the IUL policy a unique and attractive cash-accumulation vehicle.