Global Index Universal Life Insurance is IUL that offers interest crediting based on an equity index strategy option that includes foreign stock market indexes in addition to US stock marked indexes. Non US indexes commonly used are the EuroSTOXX 50 Index (Western Europe) and the Hang Seng Index (Hong Kong).
Depending on the Global Index Universal Life product, it usually offers the choices of a fixed interest strategy, an indexed strategy, or a combination of the two. The features of IUL that attracts consumers is the potential to accumulate higher than normal cash values through their ability to take advantage of the upside potential of the market. Yet there is a 0% floor that helps protect them against downside risks.
Global index universal life is generally defined by the use and performance of multiple indexes, domestic and foreign, within a current assumption universal life policy. The crediting period may vary from one to five years. As a three index example: the best performance of the top two indexes are credited to the account, one company credits 75% of the leading index and 25% of the second performing index and then eliminates the lowest index altogether. Keep in mind that policy expenses are deducted every year and in a year that all three indexes are negative, the policy would be negative. So you could lose money.
Co-Founder, Coastal Financial Partners Group, California
It is a universal life product that credits interest based on the performance of stock indexes. You are not buying the actual stocks or stock index so there is no market loss exposure. In good years you get some of the upside but in down years you get either no interest credited or something low and guaranteed e.g. 1%.
Most indexed universal life products use the most common index, the S&P 500. A few products have been developed recently using indexes from around the world such as S&P 500, Dow Jones, EURO STOX 50, Hang Seng.
Some use a more complex approach which blends them in a formula. Some blended index approaches weight the blend taking 75% of the best and 25% of the second best of the three selected over a time period e.g. one year on the belief that results over time should be better than a single index approach. Others are a more static formula e.g. Dow Jones industrial Avg(35%), Barclays capital U.S. Aggregate Bond Index (35%), Euro Stoxx 50 Index(20%), Russell 2000 Index (10%).
The bottom line is that global index products attempt to find ways to reliably credit higher interest over time using averaging or weighted averaging. While we like the idea of these global blended products, we have a bias towards simpler index products that clients can better understand.
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Depending on the Global Index Universal Life product, it usually offers the choices of a fixed interest strategy, an indexed strategy, or a combination of the two. The features of IUL that attracts consumers is the potential to accumulate higher than normal cash values through their ability to take advantage of the upside potential of the market. Yet there is a 0% floor that helps protect them against downside risks.
Most indexed universal life products use the most common index, the S&P 500. A few products have been developed recently using indexes from around the world such as S&P 500, Dow Jones, EURO STOX 50, Hang Seng.
Some use a more complex approach which blends them in a formula. Some blended index approaches weight the blend taking 75% of the best and 25% of the second best of the three selected over a time period e.g. one year on the belief that results over time should be better than a single index approach. Others are a more static formula e.g. Dow Jones industrial Avg(35%), Barclays capital U.S. Aggregate Bond Index (35%), Euro Stoxx 50 Index(20%), Russell 2000 Index (10%).
The bottom line is that global index products attempt to find ways to reliably credit higher interest over time using averaging or weighted averaging. While we like the idea of these global blended products, we have a bias towards simpler index products that clients can better understand.