by 
The Curious Bag
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If you have been thinking about purchasing life insurance, you have likely found that there are many options available. One popular option is indexed life insurance.
Definition
Indexed life insurance is a policy with a face value tied to a certain economic performance index, such as the consumer price index (CPI).
Types of Insurance
Indexing is typically applied to whole life insurance, which pays its face value to your beneficiaries if you die before age 100, or to you if you reach your 100th birthday. It can also be applied to universal life insurance as well.
Purpose
The purpose of indexed life insurance is to give you the opportunity to treat your insurance premiums as an investment. Depending on the index's performance, the face value of the policy can be significantly higher than when you purchased the policy.
Participation Rate
The face value of an indexed life insurance policy typically does not increase at a rate exactly matched to the index. It increases at a "participation rate," which is set by your insurance company.
Safeguards
Indexed life insurance policies offer safeguards to ensure that your policy will not continue losing face value if the index drops below a certain rate.
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