Participation Rate

In Indexed Universal Life (IUL) policies, the Participation Rate is a key factor in determining interest credit. It encompasses:

• Index Gain Proportion: Dictates the share of an index's gains credited to the policy's cash value.
• Interest Calculation Base: A crucial element in calculating interest based on the performance of a market index, like the S&P 500.

Example and Dynamics:

• Illustration: With an 80% Participation Rate, a 10% index gain results in an 8% return on the policy.
• Insurance Company Setting: The insurer establishes the rate, which may vary over time.
• Minimum Guarantee: There's often a guaranteed lower rate limit.

Understanding the Participation Rate is vital for policyholders to gauge potential returns and the growth trajectory of their IUL policy.