A Plain-Language Guide from Executive Benefit Solutions
If you own an Indexed Universal Life (IUL) policy, you may have received a notice that your carrier is adjusting the Cap rate — and wondered what that actually means, how it happens, and what it does to your policy.
You’re not alone. Cap rate changes are one of the most common sources of confusion for IUL policyholders, and the questions are understandable: Is the carrier making an arbitrary decision? Is this tied to regulatory requirements under AG49? Does a Cap rate reduction require the floor to move too? This Guide was created to answer exactly those questions, in plain language.
The EBS team developed this resource in response to the real-world questions our clients ask during annual policy reviews. It walks through the mechanics behind IUL interest crediting, explains the market forces that drive Cap rate changes, and clarifies the often-misunderstood relationship between a carrier’s Cap rate and the AG49 illustrated rate.
Inside, you’ll find a clear explanation of how carriers use an “options budget” derived from their general account portfolio to purchase index options each year — and why shifts in bond yields or market volatility can cause that budget to shrink, leading to a lower cap. You’ll also learn why your current policy segment is fully protected from any mid-year cap adjustment, and how a Cap change flows through to the maximum illustrated rate under AG49.
Whether you’re in an annual review meeting, fielding questions from a plan sponsor, or simply trying to understand a notice from your carrier, this Guide gives you the foundation to have that conversation with confidence.
Download the Guide to get a straightforward answer to one of the most common questions in IUL policy management.