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Interest Crediting
Each carrier offers a selection of stock market indexes that the policy owner can choose from to track. The money in the account value is not invested in these indexes. The indexes are only used to calculate the earnings at the policy anniversary. On the policy anniversary the snapshot of the performance of the index that year is used to credit the account value with interest earned. This action is called the annual reset provision and locks in the new account value until the next year earnings are measured and credited again.
The 0% Floor
Because the funds are not actually invested in the market the life insurance carrier is not exposed to the risk if an index performs negatively—or worse yet, a significant stock market downturn—the carrier does not have to transfer losses to the policy owners. Therefore, the worst the policy earnings for the year are zero. The policy earns only on upward growth and is protected from losses.
Indexing and Contract
Indexing. In most cases, the owner can change which indexes for the policy to track at least on an annual basis. This allows for flexibility and diversification during market uncertainty.
Contract. A life insurance policy is a contract. While it might be seen to some as a personal investment choice over other ways to allocate funds, an IUL is subject to protections not available through investing in stocks, mutual funds, or crypto.
1 / Planned Use For The Policy, Some Examples Are:
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Passive income or retirement income stream
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Infinite Banking
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Corporate Incentives
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Reducing taxes by moving tax deferred to tax advantaged
2 / Anticipated Funding
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Amount of Funds
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Source of Funds - Personal, Business, Or Both
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