IUL cap rates are the maximum interest rate your cash value can earn in a given period. If the market index returns 15% and your cap is 10%, you earn 10%. Cap rates typically range from 9-13% and can be adjusted by the insurance company.
Cap rates are a key feature of IUL policies that limit the maximum return your cash value can earn based on index performance.
If the S&P 500 returns 20% in a year and your policy cap is 11%, your cash value is credited 11%. If the index returns 8%, you receive the full 8%. If the index loses 10%, your floor protects you and you receive 0-1%.
When comparing IUL policies, look at the combination of cap rate, participation rate, and floor — not just one factor. A policy with a 10% cap and 100% participation may outperform one with a 12% cap and 80% participation.
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Indexed Universal Life (IUL) insurance is a type of permanent life insurance that builds cash value based on the performance of a stock market index like the S&P 500, while providing a floor that protects against market losses. Read more
IUL can be a good financial tool for high-income earners seeking tax-advantaged growth and those who have maxed out traditional retirement accounts. It is not a pure investment but a hybrid insurance-savings vehicle. Read more
Top IUL insurance companies include Pacific Life, National Life Group, North American, Allianz, and Nationwide. The best choice depends on your age, funding level, and whether you prioritize cash accumulation or death benefit. Read more
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