Understand the formula
An indexed strategy uses an external index as a reference within a contractual calculation. You do not own the index or its underlying securities through the policy. The credited result can differ substantially from the index’s reported return.
The policy defines the measurement period and calculation. Depending on the strategy, a cap may limit the credited rate, a participation rate may determine the portion of measured change used, and a spread or other adjustment may reduce the result. Ask whether dividends are included in the reference measure rather than assuming they are.
Understand what a floor protects
A floor applies to a particular crediting calculation under its terms. Insurance and other policy charges continue to matter. A zero-percent credit for a period does not mean that cash value remains unchanged after charges.
Crediting strategies and terms vary. Some terms are guaranteed and others may be changed by the insurer within contractual limits. An illustration’s assumed rate is not a promise of future credits.
Question to ask
Which formula applies, which terms are guaranteed, and how would lower credits or changed terms affect this design?
Practical takeaway
Explain the formula in your own words before comparing projected results.
iul 101 syllabus
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Purpose and Fit
Purpose and Fit
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Premiums & Policy Charges
Premiums & Policy Charges
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Indexed Crediting
Indexed Crediting
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Funding and Costs
Funding and Costs
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Loans and Withdrawals
Loans and Withdrawals
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Risks and Alternatives
Risks and Alternatives
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Reading an Illustration
Reading an Illustration