What is Fixed Account?
A Fixed Account is a type of investment option available in some life insurance policies, such as Indexed Universal Life (IUL) or Whole Life Insurance, as well as in annuities. It provides a guaranteed minimum interest rate, offering a safe and predictable way to grow the cash value of a policy. The insurance company manages the investments in the Fixed Account, shielding the policyholder from market volatility and providing steady returns.
In a Fixed Account, the insurance company credits interest to the account periodically, typically based on a declared interest rate that may change over time but will never fall below the guaranteed minimum. This makes Fixed Accounts appealing for individuals seeking a low-risk investment option that ensures stable cash value accumulation. The focus is on preserving the principal while earning modest interest, rather than maximizing market-linked growth.
For example, in an Indexed Universal Life policy, the policyholder can choose to allocate part or all of their premiums to a Fixed Account, where the returns are not tied to an index’s performance. This allows for a more conservative strategy while still benefiting from the tax-advantaged growth of the cash value.
Choosing a Fixed Account is ideal for those who prefer stability, especially during uncertain market conditions or as a safe allocation within a broader portfolio strategy.