As we conclude our discussion on Indexed Universal Life as part of your Business Succession Plan, let’s dig a little deeper into some important parts. This would include the Participation Rate and The Cap.
The Participation Rate:
If the stock market (equity index) experiences any gain, a percentage of that gain is credited to your account. In other words, it is applied to your cash value. So if your policy sets a 100% participation rate and the equities give a total return of 12%, you will be credited 12% to your policies cash value. However…….
The Cap:
Most companies set a limit on the amount of interest (gain) that is credited to your account. For example, if the company sets a CAP of 10% and the stock market gains 12%, your account will be credited 10%. Please keep in mind and I think it’s safe to say that if the market has negative returns, let’s say -12%, you will obviously have no gain. However, and very importantly, you will not incur any loses either.
Other Features:
There is no management fee. This is because the Index is in effect an unmanaged portfolio. The unmanaged portfolio mostly used is the S & P 500. While there is no management fee, the cost of Insurance (COI) reduces your money invested. Additionally there are administrative fees and expenses. Flexibility is the hallmark of this policy in that you can change both your premiums and the Death Benefit protection.
Is the Index Universal Life policy right for you?
Consider this as an option if you;
a. Desire permanent cash value Life Insurance
b. Anticipate the need to change the premium and/or the death benefit
c. Have a need for protection for 10 or more years
d. Want to participate in any market gains while protecting yourself against any loses