Universal Life Insurance
What is the cap rate in an indexed universal life policy?
The cap rate in an indexed universal life (IUL) policy is the maximum interest rate credited to the cash value in a given period, regardless of how much the underlying index gains. Cap rates are set by the insurance company and can change each year. Higher cap rates allow more growth potential.
Key Points
- Cap rate: maximum interest credited regardless of index gains
- Set by insurance company and can change each year
- Higher cap rate = more growth potential
- Example: 10% cap rate, S&P 500 gains 20% = 10% credited
- An independent agent can compare IUL policies with different cap rates