How an Index Account
Credits Interest
What the policy is for, then the arithmetic that runs it: three published numbers, and a slider so you can move the index and watch it happen. Nothing on this page is a projection and no dollar figure appears anywhere.
One policy, five jobs
The order below is the order used everywhere: in the Blueprint, in the Series, and on every page of this site.
Protection
A death benefit from day one, income-tax-free
The death benefit is generally excluded from the beneficiary’s gross income. It is in force from the first premium; not after a vesting period, not after the account grows.
IRC §101(a)
Liquidity & Access
Reach your money before 59½ without a penalty
Cash value can be accessed by withdrawal up to basis and then by policy loan. A properly structured loan is not a distribution, so there is no early-withdrawal penalty at any age.
IRC §72(e) · §72(t) does not apply
Transfer of Wealth
Passes by beneficiary designation, not through probate
Proceeds move directly to the people you named, bypassing probate; the court process that settles an estate, which can run for months. The death benefit is included in your taxable estate if you own the policy, which is why larger estates often place it in an irrevocable trust instead.
IRC §101(a) · §2042
Asset Diversity
A floor under the indexed credit
When the blended index is down, 0.75% is credited in place of the negative number. The indexed credit never goes negative; though policy charges are still deducted, so cash value can dip in a floor year.
Product feature; not a tax provision
Tax Advantages
Growth is tax-deferred; access can be income-tax-free
Cash value grows without annual taxation. Withdrawals come out basis-first, then loans can follow. This only holds if the policy is not a modified endowment contract and does not lapse with a loan outstanding. A lapsed over-loaned policy can trigger a large taxable gain.
IRC §7702 · §7702A (MEC) · §72(e)
113% participation, and no cap. The blend returned +10%, so 11.30% is credited before the 0.72% charge. There is no ceiling above this point, which is the difference between this account and a capped one.
What the floor is not.
It is a floor on the credited interest, not on your cash value. Cost of insurance, the premium load and the monthly policy charge are deducted separately, so in a year the index falls your cash value can still go down. The floor stops the market from taking the bite; it does not stop the policy from costing money.
This is the index account only. It is not the whole policy, and it is not a projection of what any policy would do for you.
Everything above comes from these
113%
Participation rate
When the blend rises, the account is credited this share of the move. Above 100% means more than the move itself. There is no cap on the upside.
0.75%
Floor on the indexed credit
When the blend falls, this is credited instead of the loss. It applies to the credit, not to the cash value.
0.72%
Index account charge
Deducted every year from the credit. It is why a floor year nets +0.03% rather than 0.75%.
These are the carrier's published figures for this index account. Participation rates and caps are set at the carrier's discretion and can be changed. Every word on this page is defined in the glossary.
Balanced Uncapped Index Account
Three indices rather than one, because US large cap, US small and mid cap, and Japan do not all have a bad year at the same time. The cash value is not invested in these indices; the account credits interest based on how the blend moves.
Their numbers, not ours
| Look-back | Average index change | After participation and floor |
|---|---|---|
| 25-year | 5.61% | 10.46% |
| 20-year | 6.37% | 10.71% |
| 15-year | 8.91% | 11.79% |
| 10-year | 8.20% | 11.38% |
| 5-year | 8.53% | 12.42% |
| 1-year | 11.88% | 13.42% |
Read these before you read the table
- The credited column is not the index column times the participation rate. Over the 25-year window, 5.61% × 113% is 6.34%, not 10.46%. The difference comes from applying the floor to each individual year: bad years are replaced rather than compounded. That is specific to this historical sequence and will not repeat.
- These are geometric averages of one-year index changes, excluding dividends, measured to 15 December each year. That is how index crediting works; it is not how a fund that holds the shares works.
- They are stated before the 0.72% index account charge, and before cost of insurance and every other policy charge.
- The policy and this index account were not available across all the periods shown. Past index behavior is not a forecast.
What this page will not tell you
It will not tell you what a policy would be worth in twenty-five years, because nobody can and the people who try are guessing with your money.
The document that describes what a policy is projected to do for you is a carrier illustration. It is built on your real age, health class and funding, it carries guaranteed and non-guaranteed columns side by side, and it is the one you should read before signing anything. Ask us for it, and ask to be walked through the charge columns specifically.
Illustrated crediting rates are limited by regulation. That limit reflects a judgment about what an index account can reasonably be assumed to earn, and the rate on your illustration is the rate to plan on.
Want the numbers built around you?
A 30-minute session, free, and no product gets mentioned unless the steps ahead of it are already holding.
Prefer to check the terminology first? The life insurance glossary explains every word on this page in plain English.
This page is educational and is not an illustration. It demonstrates how a specific index account calculates credited interest, using figures published by the issuing carrier. It is not a recommendation, not a quote, and not a projection of your results. Guarantees are subject to the claims-paying ability of the issuing insurer.
Cost of insurance rises with age. A premium load is taken from each deposit and a monthly policy charge applies. Surrender charges apply in the early policy years. Policy loans accrue interest. Overfunding past the legal limit creates a modified endowment contract, which changes how withdrawals are taxed; a policy that lapses with a loan outstanding can trigger a large taxable gain.
Chaka Ali, licensed life and health producer, NPN 11126989. Licensed in North Carolina, South Carolina, Virginia, Texas, Maryland, Michigan, Minnesota, Arizona, Oregon, Ohio, Nebraska, Kansas, Florida, Georgia. Not a securities-licensed advisor, a tax professional or an attorney.