The Participation Rate is the percentage of a market index that your indexed universal life insurance policy uses to calculate interest credits. For example, if your policy has a participation rate of 80% and the market index goes up by 10%, your policy would earn an interest credit of 8%. Knowing the participation rate is essential because it directly influences how much your cash value can grow based on market performance.
This feature allows policyholders to benefit from market gains without directly investing in the stock market, providing a balance between growth and protection. Understanding how the participation rate works can help you manage expectations for your policy’s performance and make informed decisions about your financial planning. It’s a crucial factor in evaluating the growth potential of indexed universal life policies.