Index Universal Life


Indexed Universal Life insurance is a lot like Universal Life, however it does have a couple of wrinkles not found in traditional universal insurance policies. Universal life insurance comes in many different forms, from your basic fixed-rate policy to variable models that allow the policy holder to select various equity accounts in which they can invest.   


An indexed universal life insurance policy gives the policy holder the opportunity to allocate cash value amounts to either a fixed account or an equity index account. Indexed policies offer a variety of popular indexes to choose from, such as the S&P 500.

Indexed policies allow policy holders to decide what percentage of their funds that they wish to allocate to fixed and indexed portions. Also, these types of index universal insurance policies typically guarantee the principal amount (assuming properly funded), but cap the maximum upside return each year that a policy holder can receive in their index account. Since these policies are seen as a "hybrid" universal life insurance policy, they are usually not as expensive to manage (due to the use of indexes rather than managed accounts), and are safer than variable universal life insurance policies. However, the upside potential is also limited (capped) when compared to variable policies.


The general idea is that with Index Universal Life you have the ability to participate in a portion of the upside performance of stock market, as measured by various stock market indexes, without participating in any of the losses that go along with the risk of investing in equities.  Optionally, part of one’s allocation can be in a fixed guaranteed account.