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Although equity indexed Annuities have been around for a number of years, equity indexed universal life (EIUL) insurance is a relative newcomer to the life insurance marketplace. EIUL is a spin on universal life (UL) insurance, a policy popular type because you can increase or decrease your death benefit as your needs change and your premiums can be adjusted accordingly. UL policies thus build a cash value against which you could borrow or even use to pay your premiums.

The equity index concept is relatively simple: The amount of interest credited to your policy cash value is to the performance of a particular index (S & P 500 is one of the most popular), so that in years in which the index your interest good credit increased and in years in which the index performs poorly, your interest rate credit fall.

Most measures to guarantee that your interest rate credit never below zero, so you do not lose money (you just do not do). They also have a ceiling, as the high rate of credit it to you. The range of possible sentences is often called with "upside potential with downside protection. "

How it works

Normally the wide range for the purchasers of life insurance is whether to go with a "secure" universal life policy, a guaranteed minimum rate, but limited potential for the cash collection or to go with a "" risky "variable life policy that offers more possibilities for the outcome, but no protection against losses on the market.

EIUL insurance is an attempt to bridge the gap between these two approaches. EIUL is universal life insurance, in which the cash value is linked to a specific index. If the index at the end of the year, your cash value to the top. If the index stays flat or goes, your money value of the guaranteed interest rate (say, 2 percent). Please note that if your index is not mean that your cash value is the full index, since the fees and dividends and capital gains are not included in the present value of the calculation.

But are these new products, the best of both worlds? Let's take a look at both sides of the coin.

The advantages and disadvantages

One advantage of EIUL is the potential for higher interest crediting rates than a traditional universal policy. Another advantage is that it offers more protection from market downturns than a variable life insurance.

Stephen Mitchell, product & competition analyst for Pacific Life Insurance Co., based in Newport Beach, Calif.., Points out that while these products are not a cure-all, they can offer "an attractive middle ground for buyers who saw the market downturn of 2001-2002 and are looking for some guarantees. "" These products can offer some peace of mind to buyers looking for a mix of guarantees and some potential for cash accumulation.

However, there may be disadvantages to using an equity indexed product. The head of an equity indexed disadvantage is that it is with somewhat higher risk than a traditional universal policy. Also, the cap rate you can earn maximum limits of the upside potential in comparison to a variable and may be amended periodically by the insurance company.

Steven Weisbart, economist for the Insurance Information Institute, thus Cautions that "" the crediting rate system in these products is probably not familiar to would-be buyers and agents. "" Since there are so many "moving parts" to one of these products, it is sometimes difficult to figure out what the product actually does at first.

Insurance EIUL fill a gap between the traditional Bookends of the modern insurance market, but it would be an exaggeration to term it the best of both worlds. EIUL does not guarantee the attractive prices of the universal life market is still the genuine participation of the variable life insurance. However, EIUL offers an attractive third option for buyers and can be ideal for people whose needs have been overlooked by existing insurance decisions.

It is right for me?

Equity index universal life insurance may be right for you if you meet the following criteria: the potential cash accumulation of variable life insurance contracts is too tempting, but seems too risky and the guarantees of the general life of comfort, but the potential for cash value accumulation seems to be low.

If these conditions describe you, then an equity indexed universal life insurance can be a way for you to explore. But before deciding on a particular product, be sure to research the insurance company behind it.

Because the amount of interest credited to you is in the hands of society and what guarantees the product offerings are only as stable as the insurer itself. As with other types of insurance, always check the insurance ratings (AM Best, Moody's, Standard & Poor's, etc.) to get a better picture of how much the company financial support.

Visit Insure.com for a free universal life insurance quote.

Amy Danis is a staff writer for Insure.com. Visit Insure.com for a comprehensive series of comparative auto, life and health services, including a large library of original author insurance articles and decision-making tools that are not from another source. Insure.com is dedicated to providing impartial insurance information to consumers. Visitors can instant insurance quotes from more than 200 leading insurers, the maximum savings and have the freedom to buy from any company shown.