The first Equity Indexed Universal Life insurance policies were introduced in 1995. (IUL) can offer permanent protection and builds cash value on a tax deferred basis. IUL offers face amount flexibility, and a choice of 3 different death benefit options; level, increasing and sum of premiums. IUL offers a choice between choosing a fixed account for your accumulation value or an indexed account.

The fixed account will usually offer around 4 or 5% with a minimum guarantee of around 3%. For a person who would like the opportunity for more growth than a fixed account but is opposed to the risk associated with a variable universal life policy that fluctuates with the returns of the stock market, an indexed account can be a good choice.

The indexed account’s found in IUL policies tracks or “mirrors” the performance of indexes such as the Standard & Poor’s Composite Index of 500 Stocks and the Dow Jones World-Ex U.S. Index without actually investing in the stock market. The (cap) that is set for crediting interest to the cash accumulation values each year offers the upside potential of growth; some policies will set the cap between 11% and 16%. The (floor) is usually set between 0 and 2%. This provides downside protection against negative performance that would be associated with investing in the stock market.

Over the last 30 years, an investment that reflected the performance of the S & P 500 would have averaged a little over 9% growth. It would be a good idea to choose a policy that allows the policy holder to change from a fixed to an indexed account and vice versa. IUL can be a cheaper way to provide permanent protection than a whole life policy but it can also be a powerful tool in building cash value with tax deferred growth if the policyholder pays enough premium.

As with any cash value life insurance policy, it would be a good idea to work with an insurance or investment advisor to help you understand exactly how the policy works and to choose an appropriate strategy to match you and your families needs and goals.

Equity Indexed Universal Life Insurance Does:

• Offer permanent life insurance protection
• Build cash value with tax deferred growth
• Allow you to borrow from the cash value
• Offer premium and face amount flexibility
• Offer a choice between indexed or fixed account

Equity Indexed Universal Life Insurance Does Not:

• Allow you to manage the investments (with the exception of index choice)