A:

Indexed univeral life insurance is a lot like universal life insurance, however it does have a couple of wrinkles not found in traditional universal insurance policies. Universal life insurance comes in many different forms, from your basic fixed-rate policy to variable models that allow the policy holder to select various equity accounts in which they can invest. An indexed universal life insurance policy gives the policy holder the opportunity to allocate cash value amounts to either a fixed account or an equity index account. Indexed policies offer a variety of popular indexes to choose from, such as the S&P 500 and the Nasdaq 100.

Indexed policies allow policy holders to decide the percentage of their funds that they wish to allocate to fixed and indexed portions. Also, these types of universal insurance policies typically guarantee the principal amount in the indexed portion, but cap the maximum return that a policy holder can receive in said account. Since these policies are seen as a "hybrid" universal life insurance policy, they are usually not very expensive (due to lack of mangement), and are safer than an average variable universal life insurance policy. However, the upside potential is also limited when compared to variable policies.

To learn more, read Intro To Insurance: Types Of Life Insurance.

This question was answered by Lovey Grewal.

RELATED FAQS

  1. What debt/equity ratio is typical for companies in the insurance sector?

    Learn about the average debt-to-equity ratio among insurance providers. Find out about the ranges of D/E among insurers and ...
  2. How does the risk of investing in the insurance sector compare to the broader market?

    Discover the risks of investing in the insurance sector compared to the broader economy. Insurance stocks thrive when short-term ...
  3. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, float investing and ...
  4. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Find out all about the main competitors for Berkshire Hathaway, a Warren Buffett-led diversified holding company with involvement ...
RELATED TERMS
  1. Distribution Clause

    An insurance policy provision which determines how the coverage ...
  2. Insurance Consortium

    A group of businesses or organizations that join together to ...
  3. COPE Insurance

    A set of risks that property insurance underwriters review when ...
  4. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  5. Blanket Medical Expense

    An insurance policy which provides coverage for all medical expenses ...
  6. Cestui Que Vie

    The individual who is the beneficiary of a trust or insurance ...

You May Also Like

Related Articles
  1. Active Trading Fundamentals

    Who are Berkshire Hathaway's (BRK.A) ...

  2. Investing Basics

    Which insurance companies pay the highest ...

  3. Stock Analysis

    How UnitedHealth Group Makes its Money

  4. Economics

    How Big Data Has Changed Healthcare

  5. Stock Analysis

    3 Things That Could Hold Intuitive Surgical ...

Trading Center