When you use an indexing strategy on an IUL policy, does the reset value work the same as an index annuity, whereby the value represents a base for figuring out an income payment rate (not cash surrender value or inheritance value)?
When you use an indexing strategy on an IUL policy, does the reset value work the same as an index annuity, whereby the value represents a base for figuring out an income payment rate (not cash surrender value or inheritance value)?
The answer is yes, but not how you described it. An Index Annuity does not work like that.
An Index Annuity uses the index calculation, starting with the annual reset value, to determine surrender value growth. Surrender Value is 100% determined by index calculations. (unless the client chooses the fixed interest account)
The Income Rider on an Indexed Annuity (if offered, not all have income riders) sometimes uses the Index Calculations to determine the Income Base. But they also sometimes use a fixed interest rate to determine Income Base on the Rider.
Also, the Death Benefit of an Index Annuity is not always the Surrender Value. Sometimes the Income Rider Value is used, or there is a separate DB value all together.
So again; the Surrender Value & Account Value are dictated by the index calculations.
The same is true on an IUL. Index Calculations determine Cash Value & Death Benefit growth.
