Page 7 - Understanding IUL Insurance

INDEXED ACCOUNT CREDITING
Policy owners have the choice of a number of Stock Market Indexed Accounts with different index crediting options. Two of the most popular are called the Participation Rate Account and a Cap Rate Account.
A Participation Rate account will generally pay a stated percentage of the performance of the index. For example, if the insurance company has a 60% participation rate and the index performs at 30%, the cash value will be credited 18% (60% x 30% = 18%).
A Cap Rate Account will generally pay 100% of the index performance up to a stated Cap. For example, if the insurance company has a 13% cap rate and the index performs at 30%, the cash value will be credited 13%.
The following chart illustrates an example of how an indexed account would have performed in various years at different interest rates.
S&P 500 Index
S&P 500 Index
Participation Rate: 60%
Cap Rate: 13%
End of Year
Index Change2
Indexed Account
Index Change2
Indexed Account
2008
-37.00%
0.00%
-37.00%
0.00%
2009
26.46%
15.88%
26.46%
13.00%
2010
15.06%
9.04%
15.06%
13.00%
2011
2.11%
1.27%
2.11%
2.11%
2012
16.00%
9.60%
16.00%
13.00%
2013
32.39%
19.43%
32.39%
13.00%
2014
13.69%
8.21%
13.69%
13.00%
2015
-1.38%
0.00%
-1.38%
0.00%
2016
11.96%
7.18%
11.96%
11.96%
2017
21.83%
13.10%
21.83%
13.00%
2018
-4.38%
0.00%
-4.38%
0.00%
1 Check with the issuing insurance company for specific details.
2 Source: https://ycharts.com/indicators/sandp_500_total_return_annual
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