Fixed Indexed universal life insurance is a policy that offers a choice between a fixed interest rate paid on cash values or a rate that varies depending on the movement of an index chosen by the policyholder.  A common misconception of indexed universal life insurance is that policyholders gain exposure to the stock market because of the indexing feature and therefore face market risks. Nothing could be further from the truth. Indexed universal life insurance is not a way to gain exposure to the stock market, and it should never be construed as such. The indexing feature is merely an alternative method of determining the interest rate at which money in an indexed universal life insurance policy will earn.

Fixed Indexed universal life insurance, just like all other forms of fixed account cash value life insurance products, is a stock market neutral product (i.e., it does not decline in correlation with the stock market the way several other savings vehicles do). This makes it a wonderful complement to any portfolio to help diversify risk or a great refuge for those who are spooked by market volatility and want to minimize their exposure. But, it also has high potential to deliver very competitive growth to policyholders since it gains substantially from movement in the stock market. Whether that movement be a continued bull market or a recovering market following a correction, positive gains over the time period tracked by the indexed account can net huge growth to policyholder cash values.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.