Equity-Linked Policy

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Equity-Linked Policy

A whole life insurance policy in which some or all of the premium is allocated to a separate account, which is invested in common stock. If the common stock portfolio does well, the death benefit increases accordingly; if it performs poorly, it decreases. However, all equity-linked policies have a benefit floor. A significant advantage to an equity-linked policy is the fact the policyholder does not have to pay taxes on earnings from the portfolio until it is cashed in, usually through death. In the United States, equity-linked policies are considered securities contracts and, as such, they are regulated by federal law. An equity-linked policy is a type of variable life insurance policy.