In Equity Indexed Life Insurance, which statement is true?

• A. It has no minimum guaranteed return
• B. It credits fixed interest regardless of index
• C. It has a minimum rate of accumulation and may mirror index gains
• D. It guarantees the index will outperform the market

Answer: (C)

Equity-indexed life insurance ties a portion of the policy’s cash value growth to an index, offering potential for higher returns while guaranteeing a floor. The true statement reflects the product’s structure: there’s a minimum rate of accumulation (a floor) on the cash value, so you won’t drop below that baseline even if the index performs poorly, and in favorable years the policy can credit interest that mirrors or follows a portion of the index’s gains (subject to participation rates and caps). This is different from a fixed-interest product, which earns a predetermined rate regardless of index movement, and it does not guarantee that the index will outperform the market.