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Although equity indexed annuities have been around for a number of years, equity indexed universal life (EIUL) insurance is a relative newcomer the life insurance market. EIUL is a twist on the universal life (UL) insurance, a kind of popular policy because it may increase or decrease your death benefit according to their needs and premiums can be adjusted accordingly. UL policies also build cash value against which you can borrow, or even used to pay premiums.

The concept of equity-indexed is relatively simple: the amount of interest paid on your cash value policy is linked to the evolution of a special index (the S & P 500 is one of the most popular), so that in years where the index performs well its accreditation rate increase, and in years where the index performs poorly, the interest crediting rate will fall.

Most policies guarantee that your accreditation fee interest never fall below zero, so you will not lose money (you do not do it). They also have a limit as to how high a crediting rate will you. This range of possible rates is often described as providing "protected upside down".

How works

Normally, the choice facing major life insurance buyers is whether to go with a "secure" universal life policy that offers a minimum guaranteed rate, but the limited potential for cash accumulation or to go with more "brinkmanship" variable life which offers more earnings potential but does not protect against market losses.

EIUL insurance is an attempt to fill the gap between these two approaches. EIUL is a universal life insurance in which the cash value is tied to a particular index. If the index is higher at the end of the year, your cash value may go up. If the index stays flat or falls, the value of your cash earns the minimum guaranteed interest rate (eg 2 percent). You should note, however, that when the index goes up, it means that your cash value increase will reflect the full rate increase due to fees, and dividends and capital gains are not included in calculating the cash value is.

But are these new products in the best of both worlds? Let's look at both sides of the coin.

The Pros and Cons

One advantage of EIUL is the potential for higher interest rates for accreditation of a traditional universal policy. Another advantage is that it offers greater protection from market downturns variable life insurance policy.

Stephan Mitchell, analyst at the product and competition from Pacific Life Insurance Co., based in Newport Beach, California, notes that while these products are not a panacea, they can offer "an attractive middle ground for the buyers, who saw the market decline of 2001-2002 and is seeking some guarantees. "These products may offer some reassurance to buyers seeking a combination Guarantees and some potential for accumulation of cash.

However, it may be fine to have an equity indexed product. The main Indexed disadvantage of a capital product that comes equipped with a slightly higher risk than a traditional universal policy. In addition, the maximum of the maximum rate You can gain limited growth potential compared with a policy variable and may be modified periodically by the insurance company.

Steven Weisbart, an economist for the Insurance Information Institute, also cautions that "the kind of accreditation system for these products is probably not familiar for prospective buyers and agents. "Since there are so many" moving parts "to one of these products, it is sometimes difficult to find out what really makes the product at first.

EIUL insurance policies fill a void between the two traditional extremes of modern insurance market, but would be an exaggeration the term the best of both worlds. EIUL does not have attractive rates guaranteed universal life, or the actual market share of variable life insurance. However, EIUL do offer a third option attractive to buyers and may be ideal for people whose needs have been overlooked by existing insurance options.

Is it right for me?

Equity indexed universal life insurance may be right for you if you fit the following criteria: The potential cash accumulation of variable life insurance is attractive to you, but it seems too risky and the guarantees of universal life are comforting to you, but the potential for accumulation cash value seems too low.

If these conditions describe you, an action policy Indexed universal life insurance may be one avenue to explore. But before deciding on a particular product, be sure to research the insurance company behind it.

After all, the amount of interest paid is in the hands of the company and ensuring the product offerings are as solid as the insurer himself. Just As with other types of insurance, check always in the insurer's ratings (AM Best, Moody's, Standard & Poor's, etc.) to get a better picture of the company that is financially strong.

Visit Insure.com for a free quote, universal life insurance.

About the Author:

Amy Danise is a staff writer for Insure.com. Visit Insure.com for a comprehensive array of comparative auto, life and health quotes, including a vast library of originally authored insurance articles and decision-making tools that are not available from any other single source. Insure.com is dedicated to providing impartial insurance information to consumers. Visitors can obtain instant insurance quotes from more than 200 leading insurers, achieve maximum savings and have the freedom to buy from any company shown.

Article Source: ArticlesBase.com – Equity Indexed Universal Life Insurance: the Best of Both Worlds?