Definition: The term "Life Insurance Indexed Universal Life" refers to a policy that has a fixed interest rate or index based on an index, rather than directly paying out cash to the insured's beneficiaries based on their mortality. In a Life Insurance Indexed Universal Life policy, there is generally a fixed interest rate that applies over a specified period of time. This interest rate may be adjusted periodically, with adjustments in the amount of the interest depending on changes in the index or an agreed upon index value. For example, a policy might have an annual interest rate of 5% and adjust based on a return on the stock market, which could range from a high of 10% to a low of 2%. The policy would pay out cash at maturity if the index were to rise above a predetermined level, or if the investor's investment returns exceeded a certain threshold. The term "Indexed" means that the interest rate is tied to an indexed value. This indexed value may be based on factors such as inflation, bond yields, or other economic indicators. It's important to note that Indexed Universal Life policies can have lower risk than traditional universal life policies because they are designed to pay out a fixed amount of money in a specific period of time, and the interest rates are tied to an index rather than a set face value. However, the interest rate may change based on market conditions or changes in the index, so the policy should be carefully reviewed by a financial advisor to ensure that it is appropriate for the investor's needs and risk tolerance. In summary, "Life Insurance Indexed Universal Life" refers to a type of life insurance where an indexed rate applies over time rather than directly paying out cash based on mortality.
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