Full Disclosure covers universal life insurance products twice yearly and features both fixed and indexed policies. This new excerpt features values and features for indexed policies. Earlier reports featured straight illustrations, retirement income illustrations, and minimum premiums necessary to guarantee the face premium and death benefits. This report is a bit different and features caps and participation rates that affect the amount of gain the policy experiences due to gains in the underlying index. It also features the indexing methods (the mechanisms that translate those gains) that are available.
Indexed UL combines the flexibility and guarantees of traditional UL with the potential for high credited interest rates without participating directly in the stock or bond market to which the policy is indexed. You will see in the accompanying charts that there are significant differences among policies in how the gains in various indexes, or combinations of indexes, are translated to policy values. Caps and participation rates, whether current or guaranteed, limit the amount of gain relative to the gain of an index, such as the S&P 500 Index. Crediting methods also affect policy values because they dictate when the gains are applied to the policy’s value.
It may be tempting to highlight the best parts of the contract, while ignoring other elements that are less attractive. A “whole contract” policy analysis shows how the puzzle pieces of indexing option, crediting method, participation rate, and caps on gains fit together. A policy with a 100% participation rate, for example, may have a lower cap on gains than a policy with a lower participation rate but a higher cap.