New Money

In the realm of life insurance, particularly in policies like Indexed Universal Life (IUL), "New Money" refers to recent financial inputs by policyholders. Its key characteristics include:

• Fresh Contributions: These are additional premiums or funds added to the policy.
• Distinct from Accumulated Gains: Separate from the interest or earnings already generated by the policy's cash value.

Allocation and Usage:

• Interest-Crediting Strategy: New money may be subjected to different crediting methods compared to existing funds.
• Options Purchase or Fixed Account Allocation: Insurers might use these funds for purchasing options for index-linked crediting or place them in the policy's fixed account, based on policyholder choices and policy structure.

Impact on Policy:

• Growth Determinant: Plays a significant role in the policy's cash value evolution.
• Influence on Policyholder Benefits: Affects the eventual benefits available to the policyholder.

Understanding the concept and utilisation of new money is crucial for policyholders to effectively manage and maximise the potential of their insurance policies.