This term refers to a tool designed to project the potential growth of an Indexed Universal Life (IUL) insurance policy when contributions are made up to the maximum allowable limit under IRS regulations. The calculation typically incorporates factors such as premium payments, policy fees, index crediting methods, and potential interest rate caps to estimate the policy’s cash value accumulation over time. For example, a user might input a desired annual premium, an expected market index return, and the policy’s specific features to generate a projection of the policy’s value at various points in the future.
The significance of understanding these projections lies in its value for financial planning. Estimating the potential performance of a policy, especially when maximizing contributions, can aid in retirement planning, wealth transfer strategies, and other long-term financial goals. Historical context shows that the need for such calculation tools arose with the increasing complexity of IUL policies and the desire for greater transparency in understanding policy performance under various market conditions. These tools assist in comparing different policy options and evaluating their suitability for individual financial circumstances.
