EQUITY INDEX UNIVERSAL LIFE

When faced with a choice of totally safe or pure risk you might prefer something in between. For those who want something in between, equity indexed universal life is the answer. Not as risky as variable universal life, equity indexed universal life plans are ideal for many people. Equity indexed universal life insurance is linked to a certain index. If the index should raise significantly by the end of the year your cash value may go up. If the index falls or doesn’t move your cash value will still earn the minimum guaranteed interest rate.

However, like all decisions there are pros and cons to be considered. First of all on the negative side, if the index goes up it does not guarantee that your cash value of your equity indexed universal life insurance goes up. Your final sum will be calculated after fees, capital gains and dividends. Therefore your cash value will not reflect the full value of the index that went up. Secondly, there is a cap rate on equity indexed universal life insurance, limiting the maximum that you can earn.

Many choose equity indexed universal life insurance because of the guarantee that they can receive from it. With variable life insurance policies, higher interest crediting rates can be achieved, however the risk is great. With traditional universal policies security is offered but lower earning potential is achieved. Equity indexed universal life has a little more protection than a variable policy and provides greater protection in case the market decides to take a downturn. There are potentials for cash gain, but these cash gains are limited.

For those who are looking for higher potentials in cash accumulation but not willing to take great risks, equity indexed universal life serves to be a safe middle ground. More potential for earning with fewer risks being taken makes it an ideal choice for many.

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