Document Type
Article
Publication Date
2017
Abstract
Equity Index Universal Life (EIUL) is a variation of whole life insurance which carries a death benefit component and a cash value component. The popularity of EIUL has been growing quickly in recent years because of its promised downside protection and upside potential. However, its long-term viability can’t be directly verified since no public data of EIUL is available to check its historical performance. This paper models the stock market return, interest rate and other market variables simultaneously to simulate the potential future returns of EIUL under different scenarios. Research in the literature often only models the stock market return and ignore the other market variables completely or fix their values in simulations. This research believes market variables such as the interest rate and credit spread will play an important part in analyzing the EIUL performance. The viability analysis is then applied to policy holders with different ages, tax brackets and financial goals. With the same initial capital, EIUL performance is compared with combination of stock index investment and a term-life policy.
Recommended Citation
Zhixin Wu. Performance Analysis of Equity Linked Universal Life Insurance, appeared in the Society of Actuaries (SOA) Actuarial Research Clearinghouse (ARCH) 2017.1
Comments
Actuarial Research Clearing House
(ARCH), a publication sponsored by the SOA Education and Research Section, is an informal communication providing current actuarial research to friends and members of the actuarial community. Its primary goal is the speedy dissemination of current thinking and aids to research. See full issue here.