How does an indexed universal life policy work?
An IUL product usually offers a choice of index options in which the client can choose to allocate premiums. If the client doesnt want to have all values subject to index performance, there is also a choice (typically) for a fixed interest account. Then, a crediting method is applied that either measures performance of the index on a point-to-point basis (difference between index value at date A to date B) or an averaging basis (average of index from point A through point B compared to starting point of A). These points are often one-year periods with resets that occur after each period (so a gain in one year cant be lost by a poor performance the next year).
