As providers of insurance and financial services, the experts at World Financial Group must often explain different types of life insurance to current and potential clients so those clients can determine what options are best for them and their families. One type of life insurance that people often have misconceptions about is indexed universal life insurance. Although it is similar to traditional universal life insurance, there are some important differences that insurance purchasers must understand in order to make the best decisions regarding this financial product.
What is Indexed Universal Life Insurance?
While it is a type of universal life insurance, there are some notable differences between indexed universal life insurance and its more traditional counterpart. For starters, indexed universal life insurance comes in different forms than traditional universal life insurance. Universal policies typically offer a choice between variable rates or fixed rates, giving buyers a range of options to choose how much they want to (or are able to) invest in their policy. Indexed universal policies, on the other hand, allow buyers to put funds into equity-indexed accounts, fixed accounts or both. Policyholders can choose from indexes such as the Nasdaq 100, S&P 500 or other popular indexes.
What are the benefits of an Indexed Universal Life Insurance policy?
When clients of World Financial Group or other insurance and financial services companies choose an indexed policy, they have more say in how much of their money they wish to distribute to different accounts. Policyholders can put different percentages of their total investment into different indexed portions, which provides a wide range of investment possibilities. Indexed universal life insurance policies also usually come with a guarantee that the principle amount in the indexed portions of the policy will remain intact, although these policies also typically have a cap on the returns that one can receive from those accounts.
Indexed policies are like a fusion of traditional universal life insurance policies and other types of financial products. Because of this, they are often much more affordable than traditional universal life insurance policies. Although indexed universal policies don’t have the intense management and potential returns of traditional universal policies, they are safer than most forms of variable life insurance. Many of the clients who come to World Financial Group appreciate this. They are often on a budget and have a family to worry about, so they prefer the reduced risk of this type of policy.