Equity Indexed Universal Life Insurance is based on traditional Universal Life, whichincludes a number of advantages, including flexible premium payments, low cost permanent life insurance, tax deferred growth of cash values and most importantly, nodownside risk. These policies have loans available, at both variable and fixed rate withsome companies, tax free death benefits and the ability to adjust the policy to meetspecific personal or business needs.
The major difference with equity indexed universal life is that you participate indirectly in the upwardmovement of a stock market index, without accepting the normal risk associated with such investment.The actual interest credited to a policy’s cash value is determined by the annual changes of an equitiesindex, most programs utilize the S & P 500 as the underlying index for their EIUL products. The mostunique aspect of EIUL, is that in years where the Underlying index increases, the account valueincreases by that percentage up to a cap limit, which is hovering around 15% at this juncture. In yearswhere the underlying index is flat or loses value, the cash value suffers no decrease, maintaining thevalue from the previous gains. This is the real value of EIUL, there is no risk of losing value in a downmarket. Some products offer a guaranteed annual return for policies maintained over a certain period of time, however the cap on increases with these products is usually lower than a non-guaranteed product.EIUL is a long term investment vehicle, it will not provide optimal returns over the short term.