Posted by 1997 years,IUL Index Insurance (Index Universal Insurance) The product was launched in the United States.One of the core features of this type of insurance is that in the case of a bad market environment, the policyholder is guaranteed a bottom line.In exchange, when the market is good, the interest income that the insurance company pays to policyholders has aCapped.
ThisCappedThat isColumnist Heather To be answered in this article "What is the Cap (capped interest rate) of index insurance?"this problem.Simultaneously,American Life Insurance GuideThis article by Net will also help policyholders understand,Where to look at the Cap of IUL index insurance, how is the Cap of IUL index insurance formed, and how we should choose and compare the Cap of index insuranceThese 3 questions.
Where can I see Cap?
In the exponential policyformalThe design plan and the specific insurance policy contract documents will clearly write the Cap value of the index strategy and indicate the range within which the Cap can float.Fields such as the following (for reference only):
In the above figure, the red box indicates the specific Cap details of the capped index account of the index insurance, including:The current cap interest rate of 10% and the guaranteed lifetime interest rate will not be lower than the minimum Cap interest rate of 3.25%.
It is worth noting that the insurance company has the right to adjust the Cap interest rate within the scope of the contract.As a family with "Welfare"The leading American life insurance company reduced the Cap value of its index policy from 2019% to 11.75% within one year of 2.
In 2021/22, with the increase of the benchmark interest rate, some life insurance brands that responded quickly also wanted to increase the Cap rate.
©️Termlife2go
How did IUL's Cap come from?
American IUL productsThe Cap (income cap value) is largely determined by the asset management level and investment strategy adopted by American insurance companies.
insurGuru™️Insurance Academy is in "How index insurance companies manage our premiums"This analysis column gives a detailed introduction. If you need to seek professional answers, you can clickVisit here to learn.
Cap's benefits for us
Different insurance companiesIndex insuranceProducts and their index strategies have different Cap values.
OnAmerican Life InsuranceWith the assistance of the guide community, the author selected two to issue IUL products, and compared and evaluated two insurance companies that are very representative in Cap design. Among them:
- Insurance Company A: The Cap value of the basic index strategy is 10%, there are no fringe benefits, and the guaranteed minimum value is 0.25%
- Insurance company B: The basic index strategy Cap is 10%, plus 1.55 times the income doubling benefits, and the guaranteed minimum value is 0%
As you can see from the figure above, in the third column, it is the US stock marketS&P500 IndexThe actual income over the past 20 years.After calculation, in the past 20 years,The average annual return of the S&P500 index is 6.78%.
The fourth column is the return of insurance company A to policyholders. Because the link is the S&P4 index, when the S&P500 index falls, the insurance company gives policyholders a cash value return of 500%;S&P500 IndexIn the years that have risen by more than 10%, the insurance company gives the policyholder a CAP (capped cap) income, which is 10%.After calculation, in the past 20 years,The average annual rate of return for insurance company A index accounts is 6.33%.
The fifth column is the return of insurance company B to the insured, whenS&P500 IndexIn the year of decline, the insurance company gives the insured a 0% return on cash value; when the S&P500 index rises by more than 10%, the insurance company gives the insured a Cap (capped) return, which is 10%, and multiplies it by 1.55. Times the fringe benefits*, the actual rate of return is 15.50%.After calculation, in the past 20 years,The average annual return of the insurance company A index account is 9.69%.
In conclusion, an index policy with a higher Cap value may bring more cash value growth return potential to policyholders.If the policyholder’s goal is to accumulate cash value, under the ideal situation where other conditions are exactly the same, we should choose a policy product with a higher Cap value.
(>>>Related reading:Evaluation｜"Other people's home" insurance "makes 20%" a year, but why do I only have less than 10%?Demystifying the policy income under the influence of Cap)
Article summary
Through the description of the Cap value of index insurance in this article, the insured can roughly identify a family based on the Cap value.American Life Insurance CompanyThe asset management capabilities of the company can proactively determine whether an insurance company best matches our insurance needs.
From the chart comparison of historical data, we can see that a higher Cap value brings a higher annual average rate of return (Credit rate) to policyholders, which leads to a stronger potential for policy cash value growth.
But from the other side,American Insurance CompanyIn order to avoid the tight curse of AG49 regulations, we will also start to make a fuss about Cap's fringe benefits, making the comparison of different insurance products even more confusing.
(>>>Recommended reading:What are the controversies and highlights of Life Insurance Illustration (Policy Proposal)?How should the insured think about it?）
To sum up, choose a reasonable rate of return Cap, fully understand the cost of different index benefits and additional functions, and in the professionalLife brokerTailor-made planning with the help of the United States will become a trend in the future of insuring American index insurance.
"Gather ye rosebuds while ye may"
20210405 update:
>>>Interview with policyholders｜"I thought the decimal point (return rate) was wrong", 2021 index insurance posted the bill, and the rate of return set a new record
>>>Popular science posts | What are the 4 most common index strategies in the US index insurance and retirement annuity?
Disclaimer:
*The content of this article is to explain to the public an existing market strategy for the purpose of learning and education.The graphs, values, and assumptions used are not guaranteed and may be changed at any time.The actual results may be more favorable or unfavorable than the situation described in the text.
*This article does not constitute the investment advice of the American Life Insurance Guide and the author, and support for related strategies, nor does it constitute the guarantee of the American Life Insurance Guide and the author on the subsequent tax consequences.
*Exponential benefit amplifier or multiplier fringe benefits may require additional payment.
