Equity-Indexed Universal Life Insurance Missouri MO
Reader’s Question:
I am a stock market investor here in Missouri and recently heard about equity-indexed life insurance. Is this a type of insurance that will cover my losses from stock market investments?
Liam
St. Louis, MO
There really has been a lot of confusion with this so-called equity-indexed universal life insurance. I even received an e-mail before which asked if equity-indexed insurance covers only death caused by the downturn of the markets. No, equity-indexed universal life insurance does not work that way. It is hinged more on life insurance than the Dow or the S&P or the Russell 2000.
Equity-indexed insurance is a fixed universal life insurance policy that was designed to offer higher returns compared to interest-sensitive universal life policies. For equity-indexed universal life insurance policies, you just have to look at the stock indices for a benchmark on how large your cash value will grow.
As an illustration, let’s say that the S&P 500 closed at 900 and also, you bought an equity-indexed universal life policy today. Your insurance provider will record the closing value of the S&P 500 at 900. Fast forward to a year later, the insurance company will write down the closing value of the said index.
Now, let’s assume furthermore that the market did better the year after you bought the insurance policy, and it closed at 1,000. Your life insurer will then credit an 11% gain on your policy’s cash value. Good for you. Yay!
On the other hand, let’s say that the opposite happened, and the S&P finished down at the 800 level. This means an 11% movement downward. So, will 11% of your cash value be deducted? No, Liam. Your gains will be indicated as zero, as the risks will be shouldered by the life insurance company.
But this is should not be viewed as a moneymaking situation, as you only have a cap of 12% gain. So, gains above 12 % won’t be credited to you.
Liam, I hope this is clearer to you now. For more information, please contact your life insurance agent in Missouri.
Tags: life insurance, life insurance policy
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