Indexed Universal Life (IUL)
Universal life crediting interest tied to an external index such as the S&P 500, with gains capped and floors protecting against losses.
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Practice This Concept
In an equity-indexed universal life (IUL) policy, how is interest credited to the cash value?
It is based on the performance of a stock index, such as the S&P 500, subject to caps and floors — An equity-indexed universal life policy is an interest-sensitive product whose cash value is credited with interest linked to the movement of an external stock index, typically the S&P 500. The insurer applies a participation rate and usually sets a cap (maximum crediting) and a floor (guaranteed minimum), so the policyowner shares in index gains but is protected against index losses. The policyowner does not own the index or the underlying stocks; the insurer simply credits interest based on index performance within contractual limits.
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