How does EIUL Actually Work – PART 1

By | April 10, 2011

No doubt the equity index annuities are present since decades, but life insurance in the markets has arrived after the emergence of equity index universal life (EIUL) insurance policies. Using EIUL premium policies allows you to make changes in the policies you purchased with the passage of time to increase the death tax free advantages, so you can set the premiums according to your financial conditions and requirements.  By using EIUL, you can take loans for many purposes, for example you can pay the charges of your premium status with the help of these loans and funding.

In equity index the amount of credited interest policies keeps the value of cash stable in the specific index that is S & P500, so if the performance of the index is good and it is moving upward, then your amounts will also increase; but if the performance of the index is poor, then it will affect the invested amounts saved for tax free retirement and the influence will be less.

Most systems claim that your invested amounts will not be affected if the market performance is poor, so there are fewer chances of money loss. They use certain rules to apply margins in your investments. These rules are often defined as inversely proportional to the decline of the market rates.

How does EIUL work?

Generally, there are two options present for the policy buyers, in which they can purchase such policies with low interest rates. The disadvantage of other types of policies is that they come with annual mark up payments or acquisition of risky life insurance policies, in which the rate of annual mark up is high with little or no guarantee for the protection of your cash value and the stability of your invested capitals.

Remember, EIUL provide you a chance to minimize the distance between these two options. The value of your cash will be linked with certain indexes in the policies of EIUL. Your cash will be higher, if the index is moving upward at the end of the year. You can get up to 2% confirmed interest rates, if the market rates and performance of the index are not increasing or going in loss. EIUL also offers you a tax free retirement policy, if you have a premium of life insurance. Remember the increase in index rates doesn’t mean that your invested cash will receive the full amounts, because many charges and fees are present there and you have to pay these charges in order to maintain the status of your good account standing.

Pros and cons of EIUL

One of the biggest benefits of the EIUL is the higher rates of interests on the deposited amounts, if compared with other conventional policies for tax free retirement. It also protects your cash in case of market deficits.

Now the disadvantages are in the fact that equity index offers are a little bit more risky than the conventional life insurance policies.

But again, the majority of options are better with EIUL, than with other traditional policies!

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