A cap sets a limit.
Know where it applies.
An annuity cap may limit the amount credited under a particular strategy, even when the referenced index rises further.
A cap is not a target return.
In a simplified example, a 5% cap would limit the relevant credit to 5% even if the index calculation otherwise produced 9%. If that calculation produced only 2%, the cap would not turn the credit into 5%.
Actual crediting may also involve a participation rate, spread, or different measuring method. Review the precise period and calculation to which the cap applies.
Hypothetical educational example only. The percentages are not a current offer, historical result, or promise of future credits.
The renewal rules matter.
A cap may change after the initial period within the terms of the contract. Ask which minimums are guaranteed, when changes occur, and whether moving to another strategy is permitted.
Annuities are long-term insurance contracts and are not suitable for everyone. Surrender periods, surrender charges, withdrawal restrictions, fees, and tax consequences may apply. Guarantees are subject to contract terms and the claims-paying ability of the issuing insurance company. Product features and availability vary by carrier and state.
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