Equity Indexed Life Insurance is tied to an equity index with a minimum rate of accumulation. If the index gains exceed the minimum return, what happens to the cash value?

• A. The death benefit increases proportionally with the index
• B. The cash value is guaranteed to stay flat
• C. The cash value mirrors the index gains
• D. The premiums are reset annually

Answer: (C)

In equity-indexed life insurance, the cash value earns interest tied to the performance of an equity index, but there’s a guaranteed minimum rate (a floor). When the index performs better than that floor, the excess gains are credited to the cash value according to the policy’s crediting method (often with a cap and a participation rate). So, if the index gains exceed the minimum return, the cash value increases in line with those index gains, rather than staying flat or being reset by premiums.