# How much could my IUL policy grow?

Estimates the cash value of an indexed universal life (IUL) policy from the premiums, the index return, the cap, the floor, the participation rate and the yearly charges, against the same money at the index return.

- Page: https://www.acalculator.org/finance/iul-calculator
- JSON spec: https://www.acalculator.org/finance/iul-calculator.json
- Version: cef27a57107a

## Default answer

Example with the default inputs (Premium each year $10,000.00, Years you pay premiums 20, Years to project 30, Index return each year 7%, Cap rate 10%, Floor rate 0%, Participation rate 100%, Yearly policy charges 1%): $10,000.00 a year at a 7% credited rate grows to a cash value of $688,050.45.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| premium | Premium each year | The premium you pay at the start of each policy year. |
| pay | Years you pay premiums | How many years you pay the premium. |
| years | Years to project | How many policy years to show. |
| index | Index return each year | The yearly change in the stock index, before the cap and floor. It is the same every year here. |
| cap | Cap rate | The most the policy credits in a year. |
| floor | Floor rate | The least the policy credits in a year, often 0%. |
| par | Participation rate | The share of the index return used to work out the credit. |
| charges | Yearly policy charges | The cost of insurance, policy fees and other charges, as a percent of the cash value each year. Your illustration shows them. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| value | Cash value at the end | The policy’s cash value after the last year shown, before any surrender charge. |
| rate | Credited rate each year | max(floor, min(cap, participation × index return)). |
| premiums | Premiums paid | All the premiums added up. |
| credits | Interest credited | All the index credits added up. |
| charges | Charges taken | All the policy charges added up. |
| index | Same premiums at the index return | The premiums growing at the full index return with no cap, floor or charges. |

## Method

rate = max(floor, min(cap, participation × index)); each year: start = value + premium; credit = start × rate; charge = (start + credit) × charges; value = start + credit − charge.

## Assumptions

- The index return, cap, floor, participation rate and charges stay the same every year. Insurers can change caps and participation rates, and real index returns vary, which a constant return does not show.
- Charges are one yearly percent of the cash value. Real cost of insurance rises with age and is charged monthly; surrender charges, loans and withdrawals are not included.
- This is an estimate, not an insurance illustration. Ask the insurer for an illustration that follows Actuarial Guideline 49-A.

## Worked examples

1. premium = $10,000.00, pay = 20, years = 30, index = $7.00, cap = 10%, floor = 0%, par = 100%, charges = $1.00 gives value = $688,050.45, rate = 7%, premiums = $200,000.00, credits = $576,113.51, charges = $88,063.07, index = $862,894.42. Source: Credit rule: FINRA, The Complicated Risks and Rewards of Indexed Annuities (participation rates, interest caps and floors limit the index-linked return), https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities (retrieved 2026-10-03); an estimate, not an illustration: National Association of Insurance Commissioners, Life Insurance Illustrations (Actuarial Guideline 49-A limits the rates an indexed universal life illustration may show), https://content.naic.org/insurance-topics/life-insurance-illustrations (retrieved 2026-10-03).
2. premium = $5,000.00, pay = 10, years = 10, index = $12.00, cap = 7%, floor = 0%, par = 100%, charges = $0.00 gives rate = 7%, value = $73,918.00, index = $98,272.92. Source: FINRA’s example: an index up 12% with a 7% cap credits 7%: FINRA, The Complicated Risks and Rewards of Indexed Annuities (participation rates, interest caps and floors limit the index-linked return), https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities (retrieved 2026-10-03).
3. premium = $1,000.00, pay = 1, years = 2, index = -$10.00, cap = 10%, floor = 0%, par = 100%, charges = $0.00 gives rate = 0%, value = $1,000.00, index = $810.00. Source: The floor holds a −10% index year at 0%: FINRA, The Complicated Risks and Rewards of Indexed Annuities (participation rates, interest caps and floors limit the index-linked return), https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities (retrieved 2026-10-03).
4. premium = $1,000.00, pay = 3, years = 3, index = $8.00, cap = 10%, floor = 1%, par = 50%, charges = $2.00 gives rate = 4%, value = $3,116.68, charges = $126.41. Source: A 50% participation rate credits half of 8%: FINRA, The Complicated Risks and Rewards of Indexed Annuities (participation rates, interest caps and floors limit the index-linked return), https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities (retrieved 2026-10-03).

## FAQ

### How does an IUL credit interest?

The credit follows a stock index but is limited. The participation rate sets the share of the index return used, the cap sets the most credited in a year, and the floor the least. Credited rate = max(floor, min(cap, participation × index return)).

### What does the cap do?

It limits a strong year. FINRA’s example for indexed products: if the index rises 12% and the cap is 7%, the credit is 7%. At $5,000 a year for 10 years that gives $73,918 against $98,273 at the full 12%.

### What does a 0% floor mean?

A year when the index falls is credited at the floor instead of the loss. With a 0% floor, a −10% index year credits 0%, so a $1,000 premium stays $1,000 before charges.

### Why do charges matter so much?

The cost of insurance and policy fees come out of the cash value every year. In the default, 1% a year takes $88,063 over 30 years, and the cash value ends at $688,050 against $862,894 at the index return.

### Can the insurer change the cap or participation rate?

Some contracts let the insurer change caps, participation rates and fees from time to time, FINRA warns, which can lower your return. Read the policy for the guaranteed minimums.

### Is this the same as an insurer’s illustration?

No. It uses one constant return and one charge rate. An illustration follows the NAIC’s Actuarial Guideline 49-A limits and shows the policy’s real charges, surrender charges and death benefit.

## Sources

- FINRA, The Complicated Risks and Rewards of Indexed Annuities: participation rates, caps and floors, and contracts that let the issuer change them. https://www.finra.org/investors/insights/complicated-risks-and-rewards-indexed-annuities (retrieved 2026-10-03)
- National Association of Insurance Commissioners, Life Insurance Illustrations: Actuarial Guideline XLIX and 49-A for policies with index-based interest. https://content.naic.org/insurance-topics/life-insurance-illustrations (retrieved 2026-10-03)