The Cap in an indexed life insurance policy is the maximum interest rate that can be credited to the policy’s cash value, no matter how well the index performs. If the index gains 12% but the cap is 10%, your policy will only grow by the capped rate of 10%.
Caps help control the insurer’s risk while allowing for growth, and they’re set when the policy is created. While caps limit upside potential, they often work alongside other protective features like a floor rate, ensuring balanced growth.