Posted by Find aSafe bottom line, steady growthThe product can be said to be the primary goal of every Chinese family’s family financial management or asset allocation.and IUL Exponential policyThe product, supported by the average annualized rate of return of the US economic weather vane S&P90 index of 500% in the past 9.8 years, assists in providing a guaranteed floor function. After 1997, it has gradually become a choice for middle and high net worth families in the United States.
But in the actual operation process, the United Stateslife insuranceGuide Network ©️brokerOne of the most frequently encountered problems is, "Does this sound too good? Too Good To Be true?Can elaborate,IULWhy can the product achieve 0% guarantee?Why can you follow the rise but not the fall?How does its interest-bearing dividends to policyholders work? "
insurGuru©️Insurance CollegeThis column will answer these questions of policyholders by analyzing the investment strategies of insurance companies.
What are IUL products?
IUL, Is the abbreviation of Indexed Universal Life, called in Chineseindex life insurance. IUL is guaranteed for lifelife insuranceOne of them.
IUL Its core feature is that it provides a guaranteed minimum cash value of at least 0% in years when the market is falling.
The benefit of this function is that when the market rises, our policy account enjoys the benefits brought about by the rise, and when the market falls, our IUL policy account has no risk of loss.
>>>Recommended reading: Learn more about what is an IUL index policy?
How IUL manages our premiums
Let's first understand how insurance companies manage and invest our premiums, as shown in the figure below:
As can be seen from the above figure, 95%-99% of premiums are used for fixed-income asset portfolios, such as bonds that are almost risk-free.It is precisely because more than 95% of the investment is used for almost risk-free high-quality fixed-income assets, insurance companies can also maintain A, A+, Aa or moreCredit Rating.
From here, as policyholders, we can also learn a little experience in assessing the risk of an insurance policy: Regardless of whether the salesperson’s words are too busy or not, but by observing the underwriting insurance company’s asset portfolio, we can preliminarily judge the risk level of an insurance company—if More than half of an insurance company's asset portfolio is stocks, so we need to rethink.
Where do the other 1%-5% premiums go?Hedging transactions or high-risk investments.
Next isIULIt can provide the core part of the guarantee function: When this very small part of our insurance premiums is invested in this part of the investment strategy, we can only hope that it will not be lost.If the market conditions were bad that year and this investment strategy was at a loss, then we still have more than 95% of premiums in safe medium and long-term bonds, and the rate of return is about 4%-4.5%.
If the market is good, the income of our policy cash value account is 95%-99% of guaranteed bond income, plus 1%-5% of hedging strategy or high-risk investment income, forming the annual IUL products of different insurance companiesRevenue cap(Postcode).
如果市场不好，虽然1%-5%的对冲策略或高风险投资部分打了水漂，但是95%-99%的部分是有稳定的收益，收益部分足够弥补1%-5%的部分。
This isIULThe principle of why the product can provide guaranteed bottom protection when the market is not good-the vast majority of money is placed in high-quality fixed-income assets. Insurance companies know better than anyone what the most "insurance" ".
Specific hypothesis case analysis
Now, insurGuru©️ Insurance Academy will show an actual IUL premium case display, which is only used to show the distribution of IUL premiums.
Suppose our Mr. Jeff puts out $100 as a premium and deposits it in an insurance policy account opened by an insurance company.
The insurance company took out $96 of it and put it into the fixed-income investment pool. This part of the money will stably generate about 4.5% of income.
This kind of financial management will guarantee that the $96 will rise back to $100 in one year.This formedIUL The ability to guarantee the bottom of the cash value account.No matter what happens this year, we can at least be sure that this $96 can return $100 even with the capital and profit.
At this time, the insurance company took another $4 and did itHedging transaction.
For example, the US S&P500 call option that an insurance company may purchase.If the U.S. economy is good and the S&P500 index has risen in a year, that's good, and this part of the insurance company's transactions will make money.
If the S&P500 index falls in a year, then this part will be a loss, with a 0% guaranteed stop loss.The cash value in our policy account will not be lost because the S&P500 index has fallen this year.
The S&P500 index may rise by 30% within a year, but since our investment part is only $4, ourRevenue cap(Postcode) May only be 10%.
This isWhy can IUL products promise 0% guarantee to policyholders, and why they can follow the rise but not the fallThe principle.
(Recommended reading: 2019/12 What are the recommended design options for American index insurance?）
New era, new products, new features
After understanding the principle of the IUL index insurance policy, policyholders who are confident in their self-investment capabilities may say: "If I want to take $10 instead of $5 to do hedging transactions, can it?If I think that after 2 years, the next market will rise by a big wave, I want 20%Revenue cap(Postcode),Yes or no? "
Or say "exceptCapped incomeBesides, I want more policy dividends, can I?"
The answer is: yes.
美国life insuranceGuide.com©️ is the first to report in the Chinese community the news that the new CSO will be launched in the whole industry in 2020. At the same time, with the update of AG49 regulations, IUL insurance products with re-adjusted costs will usher in new functions and enter a new competitive field.With the advent of 2020, the competition between insurance companies' products will also enter a more intense and professional stage.
美国life insuranceThe evaluation team of Guide.com ©️ will compare and analyze those who are the first to use the new CSO form in the next column.IULThe ability to pay dividends, adjust the cap value, and the ability to amplify the income of the insurance policy among the index-type policy brands.
