Equity

What Does Equity Mean?

Equity refers to ownership of a particular asset. It commonly takes the form of securities that are traded on stock exchanges. Stocks are a type of security that represents a share of ownership in a company. In the context of insurance, many life insurance policies include an equity component. This means that policyholders can choose to allocate a portion of their premiums toward investing in equities. Indexed universal life insurance is a common example, with cash value growth linked to a stock market index rather than a fixed rate.

Insuranceopedia Explains Equity

Many permanent life insurance policies provide an equity option. However, term life insurance policies typically do not include an equity component. Cash value accumulates at different rates depending on the product, which is why buyers often look at which life insurance products generate immediate cash value before choosing one. Many policyholders of whole life or permanent life insurance choose to invest in equities to grow the cash value of their policies. If these investments are successful, they can generate substantial returns. Some individuals opt to use this money to cover future premiums, while others may utilize it in various ways.