Equity-Indexed Universal Life Insurance New Jersey NJ
Reader’s Question:
A life insurance agent here in New Jersey recently told me about getting an Equity-Indexed Universal Life Insurance, I don’t understand what it is. Can you tell me something about this?
Lyndon
Elizabeth, NJ
Equity-Indexed Universal Life Insurance (abbreviated: EIUL) is a fairly recent type of life insurance, having been introduced to the market during the mid-90’s. The main reason for it’s creation is to provide consumers who are concerned about economic or market volatility an alternative to certain forms of life insurance coverage that are heavily-reliant on how interest rates fluctuates.
Admittedly, this kind of life insurance would not be to everyone’s taste and would require you to have at least some understanding of how stock and money markets work to be able to at least understand how the said policy would work. You may even need to consult a financial professional there in New Jersey (or that life insurance agent who talked you into this kind of policy) to fully grasp this particular type of life insurance.
Let’s give a simple explanation on EIUL. Once someone buys this kind of policy, the insurance company uses the current point value of a specific stock market index (most probably the S&P 500) as a reference point for your policy’s value. Every year that the said stock market index increases in value, so does your policy accordingly and if the index does not increase, or even lose value your policy’s growth rate would just be pegged to 0%. Most policies would also have price caps or ceilings, say the index grows by 20% and your policy has a 15% index cap, then your policy can only increase up to 15% in value.
Tags: life insurance, life insurance options, universal life insurance, advise
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