Even if the capital income have been indexed on a number of years, equity indexed universal life (EIUL) insurance is a newcomer on the market for life insurance. EIUL is a look at the universal life (UL) insurance, a type popular, because it may increase or decrease your death benefit to changes in your needs and your premium may be adjusted accordingly. UL policies also build a cash value against which you can borrow or use to pay the premium.
The concept of equity-indexed is relatively simple: the amount of interest credited to your cash value policy is linked to the performance of an index (the S & P 500 is one of the most popular), so that in years in which 'index performs well for your credit interest rate increase and, in years when the index performs poorly, your credit and rates fall.
Most policies guarantee that your interest rate credit will never be less than zero, in order not to lose money (not enough to do). They also have a ceiling as the claim of a high rate, it moves you. This range of rates is often described as offering "a potential upside for the fall protection."
How does it work?
In general, a wide range of life insurance buyers is whether to go with a "safe" policy universal life insurance that provides a minimum guaranteed rate, but limited the potential for accumulation of money or go with a more " at risk ", the variable life policy, which allows for greater potential return, but no protection against market losses.
EIUL insurance is an attempt to bridge the gap between these two approaches. EIUL is universal life insurance whose value is tied to some index. If the index is higher at the end of 'year, the cash value until May if the index is flat or down, your minimum income guaranteed money from the rate of interest (eg, 2 per cent). It should be noted however that when the index rises, it does not mean that your value increase reflects the increase in the index, because of the expense, and dividends and capital gains are not included in the calculation of cash value.
But these new products, the best of both worlds? Let's look at both sides of the coin.
The advantages and disadvantages
One advantage of EIUL the risk of higher interest rate credit of a traditional universal policy. Another advantage is that it provides greater protection against the downturn in the market of a variable life insurance.
Stephan Mitchell, analyst and product competition from Pacific Life Insurance Co., based in Newport Beach, California, said that if these products are not a panacea, but it can provide "an attractive environment for customers that have given the decline of 2001-2002 and the market are looking for certain guarantees. "These products may provide some 'peace of mind to buyers of a combination of guarantees and some potential for the accumulation of money.
However, there may be disadvantages of having an equity indexed products. The main disadvantage of an equity indexed product which is a little 'more of the risk of a traditional universal policy. Furthermore, the rate limit, the maximum rate you earn may limit the upside compared to a variable policy in May and be changed periodically by the insurance company.
Steven Weisbart, an economist for the Insurance Information Institute, also noted that "the credit system, the rates of these products is probably not aware of the so-called buyers and agents." There is so much "movement", in one of these products, it is sometimes difficult to know what actually the product first.
Insurance policies EIUL not fill a gap between the books of the modern tradition of the insurance market, but it would be an exaggeration of their term, the best of both worlds. EIUL not guarantee the rate of universal life, or the real participation in the market for variable life insurance. However, EIUL offers a third option attractive to buyers in May and is ideal for people whose needs were neglected by the choice of insurance companies.
And 'this for me?
Equity universal life insurance indexed in the month of May is good for you, if you fit the following criteria: The potential to earn money for variable life insurance is attractive to you, but it seems too risky and the guarantees of universal Life insurance is good for you, but the potential for accumulation of value too low.
If these conditions are described, then an equity indexed universal life insurance policy in May to be a way for you to explore. But before deciding on a particular product, be sure to research the insurance company behind you.
After all, the amount of interest you are given credit in the hands of society and how to ensure the supply of products are only as strong as the insurer itself. As with other types of insurance, always check the rating of the insurer (AM Best, Moody's, Standard & Poor's, etc.) to get a better idea of how the company is financially sound.
Visit Insure.com for a quote universal life insurance.
July 28th, 2009