Equity Indexed Universal Life Insurance

What Does Equity Indexed Universal Life Insurance Mean?

Equity Indexed Universal Life Insurance (EIUL) is a policy that offers both a death benefit and an investment component. Premiums for this policy are partially allocated to stock investments, from which the policyholder can eventually take a loan. However, taking such loans may reduce the death benefit. EIUL is often sold under the name indexed universal life insurance (IUL), and most insurers use the two terms to describe the same product.

Insuranceopedia Explains Equity Indexed Universal Life Insurance

Equity Indexed Universal Life Insurance (EIUL) is a type of life insurance distinguished by its death benefit, which is supplemented by stock investments. Like other forms of universal life insurance, EIUL gives the policyholder some flexibility over how much they pay in premiums and how large the death benefit can be.

This investment is relatively safe due to a 0% floor, meaning the policy’s cash value is not impacted if the market value of the stocks declines. However, it does have a capped ceiling; regardless of how much the stock values increase, there is a limit to the profits that can be added to the policy’s cash value.

The policyholder can withdraw from the policy’s cash value, but these withdrawals function as loans and accrue interest. Failure to repay them can reduce the death benefit. Buyers comparing top life insurance companies often weigh EIUL against term and whole life policies before deciding which one fits their long-term financial plan.