Indexed Universal Life has so many moving parts used to determine credited interest. What is the easiest way to explain it?
An Indexed Universal Life policy works much like any other universal life policy. It provides a life insurance death benefit for a reasonable cost. The main difference is in how the credited interest is determined. With a traditional Universal Life policy, the insurance company examines all of its investments to determine the individual rate of return on each one. Once these rates are determined, they are combined to provide a single rate of return for the company’s investment portfolio. From the single portfolio rate of return, the insurance company determines the amount of interest that will be credited to a policy. Because the company’s investment return is always changing, the company continually monitors its overall portfolio return and will change the credited interest rate when necessary. An Indexed Universal Life policy is actually much less complicated – it’s really pretty simple. The credited interest rate is based upon the movement of an index from one period of time to the
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- Indexed Universal Life has so many moving parts used to determine credited interest. What is the easiest way to explain it?
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