Pros and cons of Equity-Indexed Universal Life Insurance

It is true that many people do not understand how equity-indexed universal life insurance works. To learn more about it, we advise you to click here. But if you already know the basics of equity-indexed universal life insurance, here are some of the pros and cons.

Pros

Financially rewarding: Equity-indexed universal life insurance is even more financially rewarding than term life insurance. Regardless of the specific stock index which you wish to invest your cash value, you will make some yearly returns. In fact, it is impossible to make any loss since your insurer will not reduce your cash value for making negative yearly returns.

Tax deferment: Like other permanent life insurance policies, equity-indexed universal life insurance is immune to tax except if you want to withdraw or loan money from the account or if your beneficiary wants to receive your death benefit.

Lifetime payments: Your cash value can accumulate over time to such a level that it will be used to pay your premium.

Cons

Not cheap: The cost of getting equity-indexed universal life insurance is high compared to term life insurance. This is because you will need to a substantial amount of commission to brokers who will be helping you manage your cash value.

Not Easy to Understand: Equity-indexed universal life insurance is very sophisticated, especially if you don’t understand anything about the stock market.

Fixed interest rate: Your gain on your cash value depends largely on the fixed interest rate. For instance, if the insurance company cap the interest rate at 5%, you will not get more than that percentage even if your index makes a gain of 8%. More so, you will not get any additional benefit for the dividends paid by the market index.