The Cap Rate in an indexed policy is similar to a cap but usually refers to the maximum annual return your cash value can receive based on the linked index performance. It’s a way for the insurance company to control how much interest they credit to your account in strong market years.
While the Cap Rate limits the growth potential, it can still be beneficial as it allows you to gain interest in positive market years, even though you won’t capture the full market return. This feature helps balance growth with protection.