Potential for Higher Interest Credits
	No Risk of Loss of Cash Values
	Minimum Interest Rate Guarantees for the Indexed Account
	Tax Free Retirement Income Potential

Potential for Higher Interest Credits

The chief advantage of equity-indexed life insurance is the ability to allocate excess policy premiums to an indexed account that has the potential for higher interest credits. The indexed account feature allows the policyholder the option of directing cash values to an account that indirectly participates in the upward movement of a stock index. The indexed option may provide significantly higher interest credits than a traditional universal life or whole life insurance. In fact, many EIUL policies offer index cap rates of up to 10-14%. The combination of tax deferred cash value growth and the potential to earn higher interest credits makes the equity indexed universal life insurance policy a sound choice for anyone seeking to accumulate cash.

No Risk of Loss of Cash Values

Another equity indexed policy advantage is that cash values can be allocated to the indexed account and participate in the upward movements of a stock index without risk of downside loss normally associated with equity investing. The index account is subject to a growth floor that is guaranteed to be no lower than 0%. Therefore, if the underlying stock index loses 30%, the worst case scenario with equity index life is that the account will earn nothing for the given period. The opportunity to place cash values in the index account without risk of loss is a strong advantage and a big reason why many individuals choose equity indexed universal life policies.

Minimum Interest Rate Guarantees for the Indexed Account

Not only does indexed insurance protect cash values from downside risk, most insurance companies offering equity indexed life policies provide a guaranteed minimum interest rate if the policy has sustained periods of very low or no index credits. The actual crediting method varies by insurance company. For example, one company has a guaranteed annual return of 1% on cash values in the indexed account. If the underlying stock index loses value over the yearly period, the insurance company will still credit a 1% interest rate to cash values in the index account. Other companies offer a guaranteed minimum interest rate of 2% a year but only over a 5 year period. With this approach, no minimum interest is credited annually. However, at the end of any 5 year period, if the average indexed credit rate is not equal to 2% annually, the cash value is credited with an amount that brings the cash value up to the 2% annual guaranteed rate. The minimum guaranteed interest credit rate is a unique advantage of the equity-indexed universal life policy.

Tax Free Retirement Income Potential

The equity indexed life insurance policy offers significant tax advantages which include the ability to access cash values in retirement tax free. If the policy is structured properly, cash values may be accessed tax free via withdrawals or partial surrenders up to the basis of the policy. The policy basis is the total amount of policy premiums paid to date. Any withdrawal or partial surrender up to the basis is nontaxable. However, any withdrawals beyond the policy basis are taxable.

When policy withdrawals equal the premium basis, a policy loan can be used to access cash values. Policy loans are not taxable as long as the policy remains in effect. As long as the policy maintains enough cash value to pay expenses, taxes may be avoided. Interest does accrue on the loan but does not have to be repaid. If the loan is not repaid, the total loan balance including accrued interest will be reduced from the policy face amount at death. If however, the policy lapses due to lack of cash to pay policy costs, all cash received from the policy in excess of the policy basis will be subject to income taxes. For more information on taxes and life insurance see, Life Insurance Tax Advantages.

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