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Which Index Option Should I Choose in My Insurance Policy?

The IUL Investment Allocation Decision

Indexed Universal Life policies account for more than a quarter of all life insurance sales in the United States.  They are often used in conjunction with executive benefit programs like split dollar and deferred compensation.

How carefully have company sponsors and plan participants considered the investment choices available in each policy?  The beauty of IUL is the downside protection it offers, with crediting rates that track the S&P 500 but protect against losses by guaranteeing a minimum crediting rate of 0% or 1%, in exchange for a cap on the maximum rate that is often between 8% and 10%.

Most IUL policies have several indexes to choose from, each with a unique combination of Floors, Caps, Participation Rates and Enhancements.  It can be a challenge to choose between them, and many people simply choose the default Classic index.

But in fact, each of the indexes will perform differently in different types of markets – losing markets, low return markets, average markets and high return markets.

EBS has developed a methodology for comparing the index options available in an IUL policy and identifying which ones perform best in different markets.  The result is a helpful decision-making tool for policy owners.

You can access this tool in our white paper, The IUL Investment Allocation Decision: Which Index Option Should I Choose in My Insurance Policy?

We discuss what it all means with a reminder that IUL allocation choices aren’t a one-time decision.  You can not only change your investment option every 12-months, but you can also use more than one Index to create some diversification of risk.

For companies and participants that own Indexed Universal Life (IUL) policies, how do you decide which index option to use?  Download our white paper to read about EBS’ IUL allocation methodology tool.