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What is the definition of Indexed Life Insurance Contract?

WE ANSWER:

An Indexed Life Insurance Contract is a contract with the life insurance company that provides a death benefit that is equal to the account value and the selected face amount.

The account value is connected to an index's cumulative returns. The index being used is something like the CPI, the S&P 500 or any kind of tied index. This may be a bit complicated but in essence the account value will have a rate of return based on the changes in the index where the policy is tied with.

For example, an indexed life insurance policy is bought with a face amount of $200,000 and a premium of $200 monthly. It is tied to the CPI. If the CPI goes up by 5% the next year, the premiums will be $210 monthly and the benefit amount would be $210,000.

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