Equity Indexed Universal Life Insurance

Equity indexed universal life insurance is a type of permanent life insurance with a cash value component that grows according to the rate of a chosen index. Equity indexed universal life insurance combines growth potential with risk minimization since you don't invest your funds in the index. However, other IUL policies may offer more growth. For the most affordable equity indexed universal life insurance, compare quotes from at least three companies.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Sep 14, 2021

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The Rundown

  • Equity indexed universal life insurance is a type of permanent life insurance with cash value that grows according to the rate of a chosen index without investing in that index
  • The participation rate determines what percentage of the interest rate will be used for cash value growth
  • Equity indexed universal life insurance combines growth potential with minimized risk

There are many different types of life insurance, which can make deciding which type to buy difficult. Depending on your role as a provider, you may want to purchase a life insurance policy that can protect your family after your death and while you are living.

Some types of life insurance, including equity indexed universal life insurance, include a cash value component that can be used during your lifetime for large expenses.

Equity indexed universal life insurance has the potential to accumulate cash value according to the rate of a chosen index, while also minimizing risk by not investing the funds in the index.

Continue reading below to learn more about equity indexed universal life insurance, its pros and cons, and whether it’s a good investment for you.

You can also enter your ZIP code into our free quote comparison tool above to find affordable equity indexed universal life insurance in your area.

What is equity indexed universal life insurance?

What is an indexed universal life insurance policy? An indexed universal life policy is a type of permanent life insurance with a cash value component that grows according to a major index that is chosen by the insurer.

Therefore, equity indexed universal life insurance is also a permanent life insurance policy with cash value that grows in connection to a stock index. The policyholder can borrow against the cash value for large purchases or, in some cases, to pay their premiums.

While equity indexed universal life insurance is similar to variable universal life insurance in that it follows an index, the difference is that your cash value for an equity indexed universal policy is not being invested in the index you choose to follow.

When you choose to place all or part of your cash value into an equity index account, you are given a participation rate. The participation rate tells you how much your cash value will grow.

For example, if the equity index rate increases by 3% and your participation rate is 50%, your cash value will grow by 1.5%.

You can split up your cash value into different equity index accounts or tie it to a fixed interest rate. However, if you don’t use your cash value during your lifetime, the insurance company keeps it instead of giving it to your beneficiaries with the death benefit.

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How much is equity indexed universal life insurance?

Equity indexed universal life insurance rates are a little difficult to find because it is less popular than other universal life insurance policies. However, it may cost about the same as general indexed universal life insurance.

Below are some sample indexed universal life insurance rates by age and gender:

Indexed Universal Life Insurance Average Monthly Rates by Age and Gender
Age GroupAverage Monthly Indexed Universal Life Insurance Rates (Male) Average Monthly Indexed Universal Life Insurance Rates (Female)
25 - 35$96 - $122$71 - $96
35 - 45$122 - $171$96 - $148
45 - 55$171 - $303$148 - $238
55 - 65$303 - $491$238 - $445
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Life insurance rates can fluctuate based on your age, health, smoking status, location, policy details, and more.

What are the pros and cons of equity indexed universal life insurance?

The pros of an equity indexed universal life insurance policy include:

  • The cash value won’t decrease if the chosen index does, since the money isn’t actually invested in the stock market. The cash value just won’t increase
  • The cash value can grow and be accessed tax-free

The cons of an equity indexed universal life insurance policy include:

  • The cash value can decrease if premium payments surpass interest
  • The cash value will likely not grow as quickly as the market, because participation rates are not usually 100%
  • It is a complicated life insurance policy that may require professional help to manage and take full advantage of

When you begin looking for an equity indexed universal life insurance policy, it’s important to choose a company that is reputable and has plenty of experience managing these types of policies.

Where can I find an equity indexed universal life policy?

Equity indexed universal life insurance is not a product that is commonly offered. One of the best ways to find an equity indexed universal life insurance company is to find a company that offers indexed universal life and ask them about their customization options.

Some of the best indexed universal life insurance companies include Minnesota Life, Prudential, John Hancock, Penn Mutual, Lincoln National, Pacific Life, Transamerica, North American Company, AIG, AXA Equitable, National Life Group, Symetra, and American National.

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Should I buy equity indexed universal life insurance?

Is indexed universal life worth it? Indexed universal life insurance may be beneficial for those who provide financially for their family and want to grow their wealth.

The cash value of an indexed universal life insurance policy also allows a policyholder to accumulate assets they can use during their lifetime.

An equity indexed universal life insurance policy combines the potential for growth with the minimized risk of not being fully invested in the stock market.

Other types of universal life insurance may provide higher returns and greater growth potential, but they may also require a higher level of risk.

Your personal preference for the amount of risk you are comfortable taking is a huge factor in deciding whether equity indexed universal life insurance is right for you.

Enter your ZIP code into our free quote comparison tool below to find equity indexed universal life insurance quotes from companies near you.

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